Spotify announced it has acquired podcast development company Gimlet Media and back-end podcasting services firm Anchor on Wednesday with its Q4 2018 earnings report.
The news put a bow on the audio platform’s first quarter to turn a profit. The report showed increases in almost every category, including MUAs (monthly active users), premium subscribers and engagement. Investors, however, were put off by declining ARPU (average revenue per user).
The purchase helps position Spotify as a major podcast player, augmenting its current inventory with Gimlet’s cachet of well-known content, such as Homecoming and Reply All, and giving podcasters easy-to-use creation tools through Anchor. Spotify currently considers itself the second biggest podcasting platform in the world, behind Apple.
Why you should care
Spotify CEO and Founder Daniel Ek called the acquisitions “an opportunity that will allow us to reach beyond music to engage users in entirely new ways.”
Spotify is the latest company to bulk up its podcasting assets while the industry as a whole is growing. In September, iHeartMedia bought Stuff Media for $55 million and, E.W. Scripps consolidated its podcast assets under its Stitcher brand.
Ek estimated that in time, more than 20 percent of all Spotify listening will be non-music content.
“With the world focused on trying to reduce screen time, it opens up a massive audio opportunity,” Ek said. “This opportunity starts with the next phase of growth in audio — podcasting. There are endless ways to tell stories that serve to entertain, to educate, to challenge, to inspire, or to bring us together and break down cultural barriers. The format is really evolving and while podcasting is still a relatively small business today, I see incredible growth potential for the space and for Spotify in particular.”
The growth in podcasting provides opportunity for brands through advertising (though some have been skittish about podcast spots) and sponsored content. Gimlet produces quite a bit of branded content, and Anchor’s tools may make it easy for brands to make their own.
“We are building a platform that provides a meaningful opportunity for creators, excites and engages our users, and builds an even more robust business model for Spotify in an industry we believe will become significantly larger when you add Internet-level monetization to it,” Ek said.
More about the deal
The company said it will spend up to $500 million on podcast start-ups this year; the deal with Gimlet is rumored to be in the neighborhood of $200 million.
Spotify claims more than 200 million global users.
Ek says that this move does not mean that the platform will stray away from its core business – music. “But as we expand deeper into audio, especially with original content, we will scale our entire business, creating leverage in the model through subscriptions and ads,” he said.
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