Spotify Buys Podcast Startups Gimlet Media and Anchor

Spotify has bought two podcast firms and plans to spend up to $500m (£385m) on further acquisitions in an attempt to move beyond its music streaming roots for new growth.

The Swedish company has acquired Gimlet, the firm behind a string of popular podcasts including Homecoming, which was adapted into an Amazon TV series starring Julia Roberts.

It has also acquired Anchor, a platform that allows individuals and companies to create, publish and monetise podcasts. No price was disclosed for either deal, but Gimlet reportedly cost Spotify $230m.

Daniel Ek, the founder and chief executive of Spotify, said his company needed to break into the small, but fast-growing podcasting market in order to tap revenue streams beyond its core music service.

“We believe it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content,” he said in a blog post. “This means the potential to grow much faster with more original programming.

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Spotify is best known as a music-streaming service — and now it’s placing a big new bet on building a podcasting empire.

On Wednesday, Spotify announced all-cash deals to acquire Gimlet Media, the podcast producer whose shows include “Homecoming,” “StartUp” and “Reply All,” and Anchor, which offers tools for podcast creation, publishing, and monetization.

Terms of the deals were not disclosed. Spotify is paying $230 million for Gimlet, per a Recode report. The transactions are expected to close in the first quarter of 2019 and subject to usual closing conditions.

Spotify chief Daniel Ek is looking for more M&A: The company disclosed that it plans to acquire more podcasting companies, pegging total spending of $400 million-$500 million on multiple acquisitions in 2019.

“These acquisitions will meaningfully accelerate our path to becoming the world’s leading audio platform, give users around the world access to the best podcast content, and improve the quality of our listening experience as well as enhance the Spotify brand,” Ek said in announcing the acquisitions. “We are proud to welcome Gimlet and Anchor to the Spotify team, and we look forward to what we will accomplish together.”

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Spotify wants you to stream music, but only if you pay for it with either your money or your time.

The service is updating its terms of service, effective March 1, to make it clear that the use of ad-blockers and similar services that prevent ads from playing is not allowed. And it can terminate your account without warning if you use them.

"We've updated our user guidelines, making it clear that all types of ad blockers, bots, and fraudulent streaming activities are not permitted," Spotify said in an email sent Thursday.

This shouldn't be confused with the "Active Listening" feature Spotify has been testing in some territories since last August, which lets listeners choose to skip some ads if they don't want to listen to them.

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Streaming-audio giant Spotify shelled out around €300 million, or about $337 million, to buy podcasting companies — producer Gimlet Media and services provider Anchor FM Inc., the company said.

The deals for Gimlet and Anchor, announced last week, were primarily in cash, with the total purchase prices subject to closing adjustments, Spotify disclosed the figure in a Feb. 13 SEC filing.

Spotify isn’t done with its M&A move into podcasting: The company told investors it expects to invest $400 million-$500 million in podcasting acquisitions for 2019. But that target includes what it’s paying for Gimlet and Anchor, chief content officer Dawn Ostroff told Variety, indicating the first two deals represent the lion’s share of its podcast investment for 2019.

“We’re looking at a broad range of opportunities,” Ostroff said in an interview. “The business is so nascent. A lot of what we’re doing is obviously strategically targeting this area that we want to be a leader in.

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Some are calling it the second golden age of audio.

Podcasting, once viewed as a niche industry that catered to public radio fans, got a major boost this month when Swedish streaming giant Spotify agreed to pay around $230 million for Gimlet Media, the New York producer of such audio dramas as “Homecoming” and the documentary series “Crimetown.”

The deal — the largest to date — comes during a period of rapid growth in podcasting and could transform the industry in much the same way that Netflix changed television, analysts and executives said. Spotify’s foray into the business is expected to bolster the value of podcast firms, generate higher licensing fees for producers, and potentially create a more consumer-friendly model built around subscriptions rather than advertising revenue.

“It sends a signal that podcasting’s time has come in a big way,” said Kelli Richards, chief executive of All Access Group, a digital music and entertainment consultancy. “You are going to see a frenzy of more podcasters entering the system.”

The surge will probably prompt a wave of consolidations in a crowded market that already boasts more than 550,000 podcasts worldwide on Apple’s Podcasts app, one of the most popular ways to discover programs. Newer podcasts will need to work harder to get discovered, said Oren Rosenbaum, head of emerging platforms at United Talent Agency. The agency represents more than 50 podcast creators or companies. “It is getting tougher and more challenging,” Rosenbaum said.

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