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Spotify Boosts Podcast Business with Acquisitions

By Steve Harvey. Gimlet and Anchor get pocketed by Spotify as it bets big on podcasts.

New York, NY (February 11, 2019)—Spotify moved a step closer to its stated goal of becoming the world’s number-one audio platform on February 8 when CEO Daniel Ek announced the company’s acquisitions of Gimlet Media, one of the podcast industry’s largest production houses, and Anchor, a startup developer of podcast creation, distribution, marketing and monetization tools.

“In just shy of two years, we have become the second-biggest podcasting platform,” wrote Ek in an online Medium post. “Our podcast users spend almost twice the time on the platform, and spend even more time listening to music.” With Apple, the world’s largest podcast platform, no doubt firmly in his sights, Ek has stated that he intends to spend $500 million this year on acquisitions.

Ek expects Spotify’s podcast content to attract new listeners—especially new subscribers, of course—who are less interested in the platform’s music programming. Looking to traditional media, he wrote, “Based on radio industry data, we believe it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content.”

Gimlet Media founders Matt Lieber and Alex Blumberg have positioned their company as “the HBO of media.” Driven by the success of productions such as StartUp, Reply All and Homecoming, as well as Mogul and Crimewave, which are produced exclusively for Spotify, Gimlet has grown significantly over the past couple of years. The company recently moved into a new Brooklyn location where the company built out 12 podcast studios and a music recording studio designed by WSDG Walters-Storyk Design Group.

Gimlet’s Podcast Studios Serve Up a Cocktail of Content

Spotify reportedly paid approximately $230 million for Gimlet Media, which is around three times the company’s own valuation—an indication, perhaps, of the advertising dollars the streaming platform hopes to attract away from terrestrial radio. Podcasting advertising revenues are skyrocketing and are projected to grow at a nearly 30% annual rate through 2022, according to PwC’s Global Entertainment & Media Outlook 2018-2022, published in October 2018.

PwC’s report also projected that podcasting advertising revenues would total $650 million by the end of 2018. Spotify made nearly $200 million in total advertising in the fourth quarter of 2018, according to its latest revenue report. Podcast revenues could reach $1.6 billion by 2022, although that figure would still be dwarfed by radio revenues, which are expected to be in excess of $46 billion, the report noted.

Ek also hopes to pull people away from their video screens. In his Medium post, he noted that video is a trillion-dollar market, yet music and radio is valued at just one hundred billion dollars. “Are our eyes really worth 10 times more than our ears?” he asked. “[P]eople still spend over two hours a day listening to radio—and we want to bring that radio listening to Spotify, where we can deepen engagement and create value in new ways. With the world focused on trying to reduce screen time, it opens up a massive audio opportunity.”

According to 2018 year-end reports from Edison Research and Nielsen, 73 million people in the US listen to podcasts at least every month and 50% of all US households are podcast fans. There are now over 630,000 podcasts available and well in excess of 1.8 million episodes.

Spotify •