Artists, Podcasters and now Education Creators - Will your next online course be on Spotify?

Umang Sehgal

29 Apr 2024 — 7 min read

Mohit Jitani, Product Director at Spotify was tasked with the challenge to “looking into what learning could look like for Spotify?”. This is a master-class in identifying a sizeable market, rapid iteration, and a strong go-to-market strategy. “Courses on Spotify” is being launched specifically in the U.K with partners like BBC Maestro, PLAYvirtuoso, Skillshare, Thinkific. Why is Spotify getting into the education space, why only the UK and why could this be right strategic move? Let’s find out!

Come for the podcast, stay for the course - The fly-wheel effect!

“One of the most interesting things and trends that we started noticing was more and more people were starting to come to Spotify with some intent of learning,” Jitani says. “And we thought, how can we take this core insight and build something on top of it?” In a press release, Jitani continues to say that around half of its Premium subscribers have engaged with education or self-help themed podcasts.

The increase in demand for online learning isn’t fading anytime soon. Infact, Coursera released its 2023 Impact Report, which shows more than 20 million new learners registered for courses in the year - equivalent to total growth in the three years pre-pandemic. The question still remains unanswered, why take a multi-business model and multi-vertical approach within one user experience instead of doubling down on existing trends like short-form videos/ reels for the music, podcast or even the new audio-books vertical?

Well, video isn’t totally new to Spotify. In non-US markets, they’ve been penetrating the music video and podcast video space for the last few years. My best guess is that Spotify is creating a fly-wheel effect. By hosting far more than just music, the company can increase engagement, raise prices and maximize value in a bet to reach its long-time goal of becoming profitable.

In Spotify’s Q2 earnings call, CEO Daniel Ek and interim CFO Ben Kung repeatedly referred to “the Spotify Machine” when explaining the company’s expansion beyond music. As Ek explained, the term means the company “isn’t just a sort of one-trick pony anymore, but it’s actually multiple verticals working together” to create more choice for consumers and drive more engagement. Almost like “you may come for the music and stay for the audiobooks,” or “some customers may come for the podcast and stay for the education content.”

This strategy for Spotify to branch out from music will help improve its margins and become the profitable company it has long aspired to be. Music margins are roughly 30% of revenue — the remaining 70% goes to rights holders. Ultimately, the goal here is to increase app engagement. When engagement increases, churn decreases. This by design is inherently limited if the company sticks to its audio-first model. This strategy not only benefits the company but also benefits the user by giving them greater freedom of choice and providing more value.

Why the U.K.?

Babar Zafar, VP of Product Development at Spotify, said in a statement “Testing video courses in the U.K. allows us to explore an exciting opportunity to better serve the needs of our users who have an active interest in learning.” According to the World Economic Forum, The highest rate of new learner growth online came from emerging economies. Then why choose the U.K. as the primary market to experiment the success of this product with?

Selecting the right market would mean considering the three forces:

Demonstrated Market Appetite for e-learning.
Infrastructure supporting e-learning.
Spotify’s existing captured market foot-hold.

Let’s breakdown the forces one at a time starting with the market appetite.

Market Appetite:

Unsurprising for the online learning market which is estimated to have been worth more than $315 billion in 2023. Let’s look at few stats:

75% of the internet search for online education comes from only 14 countries.
10 of the 14 countries do not have English as the most spoken language.
8 of the 14 are developing countries.

Infrastructure Support and Readiness:

Macro-economic factors contribute a lot to the success of a particular industry. E-Learning index is a great metric to interpret and understand learning and infrastructure support in a consumable manner. It is scored on the following nine parameters:

The top five markets by weighted scores are Denmark, United States, Ungary, U.K, and France. More detailed report here: https://preply.com/en/d/e-learning-index. The U.K. holds a strong #4 on the list.

Spotify’s existing foot-hold

Spotify’s market capture needs no introduction, with over 600 million MAUs Spotify leads the industry in the music segment. US leads the market with over 240 MAUs make it the individual country that uses the app the most. The U.K. still ranks #5 in this list.

A smart combination of existing foothold, room to experiment, infrastructure readiness and market appetites makes U.K. the most promising candidate in this segment. But so does it make the U.S. a promising candidate, doesn’t it? It seems that there are two more factors contributing to this decision: 1. Existing entry of Spotify video streaming in the U.K. and 2. Spotifiy’s origins in Europe!

How will Spotify differentiate itself?

The streaming service is offering courses within four categories: make music, get creative, learn business, and healthy living. To begin with, Spotify is offering courses via a freemium model, similar to the one it used when it first launched audiobooks. Free and premium Spotify subscribers alike are able to access at least two video lessons per course for free, but will have to pay a fee to access the full course.

A large chunk of Spotify's offered courses are fittingly music-related, with tutorials for music recording and production, songwriting, DJing, radio broadcasting, and specific genre courses including rap, grime, garage, drum and bass, house, and techno. But there are also courses geared toward a larger range of topics including startups and business, cooking, money, dancing, fitness, mindfulness, video production, and art techniques from watercolour painting to photography and graphic design.

This is vastly different from the up-skilling courses we see on Coursera, Udemy and EdX. The identified gap seems to be very focused on music, video, arts, personal and mental health. It is a win-win situation for the partners to leverage the strong distribution network of Spotify to broaden their reach. Let’s look at a few examples below.

Partnerships - The creator funnel.

The first partners for Courses are Skillshare (which will focus on creatives), PLAYvirtuoso (music industry courses), BBC Maestro (Master Class-esque) and Thinkific (for those inspired to build their skills into online learning classes of their own). It is an interesting mix of high quality creators (think celebrities and professionals) and independent creators aggregated across different platforms.

BBC Maestro creates content to educate and inspire people to explore their creativity. Through prerecorded lessons and detailed course notes, anyone can learn a wide range of disciplines and follow in the footsteps of experts respected all over the world. www.bbcmaestro.com
PLAYvirtuoso is transforming modern music learning through artist-led courses, mentoring, and structured curriculums. PLAYvirtuoso develops artists to become inspirational educators and empower young creatives with real skills and outcomes. www.playvirtuoso.com
Skillshare is an online learning community where millions of creatives go to develop and deepen their skills. Watch thousands of creative classes in topics including design, freelance, 3D animation, entrepreneurship, photography, productivity, and more. Join today at https://join.skillshare.com/learn
Thinkific Labs Inc. is a leading platform for creating, marketing, and selling courses, digital products, communities, and learning experiences. www.thinkific.com

This partnership model works well for the partners as well allowing for more education content creators to use their (the partner’s) platforms to curate content and leverage the hosting and distribution of Spotify. The partnership story doesn’t stop here but it starts here. Spotify will soon define segments and a strong partner pricing model. “We’ll learn a lot about what people are actually interested in [and] we will start getting a lot of segments around that,” Jitani said. “And then we’ll go and find… the best content.”

So will your next course be on Spotify?

If you think of it companies like BBC, Skillshare, Thinkific and PlayVirtuoso would have had nothing to do with Spotify had it not been for this experiment. Spotify doubled down on its distribution network, wide outreach, agility to experiment and create the fly-wheel effect to support more revenue streams.

Spotify is the only company after Youtube, TikTok and Meta to have a very strong content distribution reach. While Youtube, TikTok and Meta focused on short form content, Spotify is taking its bet on long form content through podcasts, audiobooks and now education. It’s a strategic bet and will ensure that it dominates the space with strong creation powered by an even stronger distribution.

It’s a great case study in realism and business, where we are not talking colonizing mars, AGI, reducing global carbon footprint but purely product driven business. It remains to be seen whether this experiment will strike a chord with listeners or fall flat. Still, Spotify's willingness to try something new demonstrates its commitment to keeping users engaged on the platform, even if it means stepping outside its comfort zone.