Apple (AAPL) Developing Podcast Service

Apple Inc. (AAPL) reportedly is developing a paid podcast subscription service, or at least taking a serious look at launching one. While Apple has a popular Podcasts app and offers a podcast distribution service on its Mac and iOS platforms, it has not tried to monetize these features so far. Moreover, since Apple's iPod device and iTunes store have played significant roles in popularizing podcasts, it is a logical extension, in the views of some observers, that Apple might be considering the creation of a premium service. 

These reports indicate that Apple would seek to offer exclusive content to its subscribers, partly by enticing podcast creators to switch from other platforms, such as those offered by Spotify Technology S.A. (SPOT), SiriusXM Holdings, Inc. (SIRI), and Amazon.com, Inc. (AMZN). For its part, Spotify already has spent about $800 million to acquire various podcasting companies.

What Apple May Be Planning

If Apple does launch a podcast subscription service, it might be offered in combination with services such as Apple Music, ‌Apple TV+‌, Apple Arcade, and Apple News+ that are included in the Apple One pricing bundle. Additionally, reports suggest that, in addition to buying original content, Apple may be considering creating audio spinoffs of programs and movies that appear on Apple TV+. Adding to the speculation, in the fall Apple hired Jake Shapiro, an experienced radio industry executive, to lead a team that is working with podcast creators.

The Skeptical View

Nicholas Quah, a writer who follows the podcasting industry, cautions, "nobody's really figured out a Netflix-esque paid subscription service for podcasting just yet." He asserts that a successful paid service must deliver on "the promise that it can consistently and perpetually beat the entire universe of free alternatives."

To those who counter that people pay for audio books, Quah responds: "Audible is ... not really in the media business but in the digital retail business, ultimately dependent on the book publishing industry ... there hasn't been much public evidence that Audible has been able to pull off original content development just yet. Neither has Apple, for that matter."

He elaborates: "Apple TV+ might be a decent comp[arison], but the state of that service is pretty ambiguous ... researchers suspected the majority of those subs[criptions] were not paid for but bundled in as part of a broader distribution arrangement. The fact that Apple just further extended Apple TV+ free trials until July 2021 doesn't inspire much confidence on the user acquisition front."

Quah goes on to note that Apple Arcade, a premium mobile gaming service, failed to "keep its users coming back" within months of launch, leading Apple to cancel development contracts with game studios. Meanwhile: "Apple Music's programming is chiefly organized around one superstar talent, Zane Lowe, and there simply aren't many planetary talents like that in podcasting. Some of them are already with Spotify."

Significance for Investors

The upshot of all this is that, while it may make strategic sense for Apple to attempt to monetize the podcasting infrastructure and ecosystem that it has created, it is highly uncertain that this has the potential to become a significant profit generator for the company. Moreover, as noted in the skeptical view summarized above, Apple's success to date as a purveyor of original content is uninspiring.