Spotify’s engagement game: How Nebula and direct video uploads could change podcasting

In May 2019, Dave Wiskus and a handful of YouTubers launched an independent subscription service called Nebula. The purpose of Nebula was to provide creators — namely, video creators, podcasters, and educators — with an alternative to YouTube’s multi-channel networks. Within three years, Nebula had accumulated 175 creators with more than 120 million collective YouTube subscribers. By the end of 2023, Nebula itself had around 680,000 total subscribers.

While Nebula’s total subscriber count is a fraction of the 236 million Premium subscribers that Spotify had at the end of 2023, Spotify still found Nebula promising enough to go into business with — even considering the fact that Nebula’s 680,000 total subscribers represent subscriptions generated from bundles with other platforms in addition to direct subscriptions. Nebula’s direct subscriber count (which does not include bundles) is presumably much lower, though it is unclear by how much. So what is in it for Spotify?

Nebula by the numbers

According to Nebula’s blog, the platform saw impressive growth in 2023. It reportedly added nearly 200,000 direct subscribers, direct monthly recurring revenue (MRR) increased 162%, overall MRR increased 16%, direct subscriber churn decreased from 9% to 4.4%, and direct subscriber lifetime value (LTV) increased 41%. While these figures sound impressive, it is difficult to know how impressive they actually are without having reference values to check against. The figures leave plenty of questions, for example: 200,000 out of how many direct subscribers? 162% growth from what starting point?

In theory, at $5 per month per user, Nebula added $1 million in revenue from direct subscriptions. That figure pales in comparison to the more than $14 billion in revenue Spotify saw in 2023. However, monthly subscriptions are not Nebula’s only pricing level. The platform also offers yearly and lifetime subscriptions, the latter of which generated $4.1 million in 2023. 

Even so, given Nebula’s comparatively low reach and revenue, Spotify must be seeing something else in the platform’s offering that makes Nebula particularly enticing for the DSP’s audio and video strategy. According to Nebula, the lifetime value of a Nebula subscriber is $75, which is considerably higher than what some have estimated the lifetime value of a Spotify subscriber to be. Beyond the premium content that Nebula is bringing to Spotify’s growing audio and video ecosystem to help it compete with YouTube, Nebula may also help Spotify increase the lifetime value of its subscribers by deepening the engagement of those subscribers.

Spotify goes deep with Nebula, moving away from RSS

Spotify’s aims with its Nebula partnership are no secret. According to Jordan Newman, head of content partnerships at Spotify, “Creators are at the core of everything we do at Spotify, so we are eager to partner with Nebula, a creator-built and creator-operated platform, to bring this content to our users across the globe. Video greatly deepens our creators’ engagement, growth and retention with their fans—so we are thrilled to introduce such an innovative and diverse slate of video content to our audience.”

The platform has already opened up direct user uploads of video for podcasts, but these video episodes effectively replace the RSS audio versions on Spotify. In other words, Spotify is encouraging a format shift from a traditional podcast to a video podcast. This strategy may be indicative of larger trends driven by YouTube’s global popularity, as our MIDiA podcast forecasts elucidate. In order to compete with YouTube’s growing dominance in podcasting, Spotify must play the same game, moving toward video streams and away from RSS downloads. 

According to PodTrac, we can already see the transition happening in the data for May 2024: “Total RSS traffic across all Global Network participants was down 3% month-over-month, while total reported YouTube views were up 11% during the same time period”. This does not necessarily mean that RSS is a soon-to-be relic of podcasting, but considering Spotify’s April 2024 exit from the IAB, it does indicate that Spotify sees podcasts as an evolving format. For Spotify, leaning into video is as much about deepening engagement with its audio content as it is about dominating an all-new format.