Brief:
- Spotify has acquired podcast network Gimlet Media and podcast production platform Anchor, according to an announcement. Terms of the transactions were not disclosed, and the deals are expected to close in the first quarter of 2019.
- Spotify claims it is the second-largest podcasting platform and expects that more than 20% of listening will eventually be non-music content, with original programming central to capitalizing on that trend, according to founder and CEO Daniel Ek, in a Feb. 6 blog post.
- Spotify also released its Q4 2018 earnings, posting $1.7 billion in revenue, a 30% year-over-year increase and just short of investors expectations. That includes $199 million of ad-supported revenue, a 34% year-over-year increase, according to the company's earning report. The service had 207 million monthly active users (MAUs), which includes 96 million premium subscribers and 116 million ad-supported users, for the period.
Insight:
Spotify's acquisition of not just the previously reported Gimlet but also Anchor demonstrate how serious the streaming platform is about podcasting. While Gimlet is a podcast network with popular programs like "Homecoming" and "Reply All," Anchor is a production platform that processed 15 billion hours of content in Q4, according to Spotify. In tandem, the acquisitions will allow Spotify to produce, promote and monetize podcasts, a format that has proven popular with millennial audiences.
Spotify believes the investments in podcasting will be crucial to the growth of its user base and engagement, according to Ek's blog post, who notes that consumers spend roughly the same amount of time on video as they do on audio, yet video is about a ten-times larger market than audio. The company sees podcasts as a way to close the gap.
"Our podcast users spend almost twice the time on the platform, and spend even more time listening to music. We have also seen that by having unique programming, people who previously thought Spotify was not right for them will give it a try," Ek writes.
The move into podcasting comes amid a renewed push into the format by brands and marketers looking to take a bite into a podcast ad revenue market that is projected to reach $659 million by 2020, according to the Interactive Advertising Bureau and PwC.
Just this week, iHeartPodcast Network nabbed Charmin, Safe Auto and Fair as sponsors of a podcast starring Will Ferrell's Ron Burgundy character from the "Anchorman," while Refinery29 paired with Intuit on a podcast expansion of its popular "Money Diaries" platform. Additionally, Nike teamed with sporting goods retailer Intersport on an educational, training-focused podcast featuring ultra-marathon runner and influencer Coach Lee.
Even though it barely missed revenue projections, Spotify's Q4 2018 earnings contained plenty of good news. Ad-supported revenue grew faster than overall revenue, with ad-supported MAUs grew 24% year-over-year to 116 million, and premium subscribers grew as well. Increased podcast content, whether new or preexisting Gimlet offerings, could help the service attract both premium and ad-supported subscribers as it faces competition from several other services, like Apple Music. Apple's offering now has 50 million paid subscribers, but no free, ad-supported tier.
