Spotify buys two podcast companies, and plans to spend even more

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Spotify has acquired podcasting startup Gimlet Media for around $230 million and has also snapped up Anchor, a startup that makes it easier for people to record and distribute their own podcasts, according to Recode. These purchases make Spotify the second-biggest podcasting platform behind Apple, according to a blog post by CEO Daniel Ek, announcing the acquisitions. These purchases are apparently just the beginning, as the company has outlined its plans to spend $500 million on podcasting investments.

Gimlet, based in Brooklyn, is the company behind popular shows such as Reply All. It has also ventured into TV production: Its scripted podcast Homecoming was picked up by Amazon and turned into a series starring Julia Roberts. Other shows by Gimlet Media include business series StartUp, true crime series Crimetown, and narrative drama The Horror of Dolores Roach.

It’s the first time that Spotify has acquired a content company. Spotify has been trying to enter the video business, but it had also been signaling that it wanted to expand into podcasting. In early 2018, Spotify launched a new section that combines visual elements with podcasts, which includes content from Gimlet Media. The service also started to allow users to add their shows to the podcast section (here’s how to do so).

Spotify’s 200 million users rely on the music streaming service for their daily dose of audio content, so adding podcasts to its offerings will not change it much from the user’s perspective. Compared to the tightly controlled music business, the podcast industry is still small and young, with no dominant labels.

Podcasting’s ad model generated $315 million in revenue in 2017, which is a fraction of the $11.9 billion that digital video ads earned that year. However, the podcasting industry is growing rapidly, which makes it an attractive form of content for platforms and publishers looking for new revenue streams. Ek sees podcasting as a way to increase the value of audio as a revenue generator, pointing out what he sees as an arbitrary discrepancy between audio and video content:

Video is about a trillion dollar market. And the music and radio industry is worth around a hundred billion dollars. I always come back to the same question: Are our eyes really worth 10 times more than our ears? I firmly believe this is not the case. – Daniel Ek

It’s worth noting that these acquisitions will place Spotify firmly into the podcast industry — and into deeper competition with Apple, a major podcast distributor that does not spend much effort on creating podcast content.

Offering podcasts will keep users on Spotify, rather than having them move to other apps to access such content. Spotify will also be able to bring in additional users and ad revenue while giving it a bigger opportunity to create original content.

Updated on February 6, 2019: Added details of the two podcast acquisitions and quotes from Daniel Ek around the company’s future plans.

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