Brief:

• Apple plans to pay for original podcasts that would be exclusive to its audio streaming service, unnamed sources told Bloomberg News. Company executives have contacted media companies and their representatives to buy rights to podcasts, the report said.
• The Apple Podcast app generates anywhere from 50% to 70% of listening for most podcasts, industry executives told Bloomberg.​ Apple hasn't publicized its podcasting strategy, although the tech giant has made a bigger push into original content this year with plans to start a video-streaming service called Apple TV+ in the fall.
• Spotify's stock fell as much as 2.7% following the report, reflecting concerns about Apple's growing power in the market for streamed audio. Spotify in March filed an antitrust complaint against Apple in Europe, alleging that the iPhone maker abuses its control of the App Store.

Insight:

Apple is credited with practically inventing the podcasting industry with the iPod, but the tech giant mostly has worked to collect and organize the work of others. By investing in original podcasting content, Apple is continuing a recent theme of paying for exclusive programming that gives consumers another reason to buy products like the iPhone, iPad and Apple Watch. The company in March announced the introduction of Apple TV+, a video streaming service that will feature original programming from media heavyweights like Oprah Winfrey, Steven Spielberg and J.J. Abrams.

Paying for original podcasts will help Apple to differentiate its audio service from competitors like Spotify, Pandora and Amazon's Audible. Spotify is Apple's biggest rival for audio streaming, and commands about 10% to 20% of the podcast market. The streaming audio giant this year has made significant investments in original content, including $400 million to acquire three podcasting companies. It also started testing a new version of its app to give podcasts greater prominence. Last month, Samsung and 3M were the first brands to test out podcast listener targeting on Spotify, which has 123 million users of its ad-supported service worldwide. As the podcasting market matures and consolidates, Apple and Spotify's rivalry will only intensify.

Stronger podcasting competition has pushed Apple to pick up the pace of innovation after years of making slow but steady changes to podcast delivery. Apple in 2012 split off podcasts from iTunes for iPhones and iPads with the launch of its first Podcast app, and this year introduced a podcast app for Mac computers. Apple also launched Podcast Analytics to help podcasters measure listenership and possibly monetize their creative efforts with sponsorships.

Slowing sales for the iPhone have led Apple to expand into services that generate ongoing revenue from its massive user base. In addition to the upcoming Apple TV+ and Apple Arcade gaming platform, Apple has expanded content platforms like Apple Music and Apple News. Its high-margin services business, which includes the App Store, Apple Pay and iCloud storage, showed healthy growth of 16% to $11.5 billion as subscriptions reached 390 million in Q1. Those results put the company on track to reach its of annual goal of $50 billion in services revenue by next year.