Spotify is best known as a music-streaming service but it’s placing a big new bet on building a podcasting empire. Spotify has announced 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.”
Brooklyn-based Gimlet Media was founded in 2014 by former public-radio producers Alex Blumberg and Matt Lieber. In addition to its lineup of original podcast series, it operates an in-house advertising agency and Gimlet Pictures, a film and TV development and production arm. Among Gimlet’s Hollywood deals was a pact with Amazon Studios to adapt podcast Homecoming as a series starring Julia Roberts.
Anchor FM Inc. was founded in 2015 by Michael Mignano and Nir Zicherman. The Manhattan-based startup provides a free-to-use podcasting platform and content hosting, along with monetization options. The company claims it powers more than 40% of the industry’s new podcasts, with an aggregate of 15 billion hours of content hosted on Anchor in the fourth quarter of 2018.
Spotify announced the acquisitions along with releasing Q4 2018 results. The company now has over 96 million Spotify Premium subscribers — up 36% year over year — across 78 markets. Total monthly active users climbed 29%, to 207 million, for the year-end quarter, with growth topping Spotify’s forecasts in most markets with especially strong growth in Latin America and other emerging regions, the company said. Spotify’s Q4 revenue was $1.7 billion (€1.495 billion), up 30%. The company cut operating costs by 17% in the fourth quarter, resulting in an operating profit of $107 million (€94 million) — Spotify’s first quarterly operating profit.
For 2019, because of the podcast M&A strategy, Spotify expects to return to red ink. It forecast full-year 2019 operating loss of between $228 million-$410 million (€200 million-€360 million) on revenue of $7.23 billion-$7.74 billion (€6.35 billion-€6.8 billion), up 21%-29% versus 2018. Spotify expects Premium subscribers to be 117 million-127 million at the end of 2019 and total monthly active users to b in the 245 million-265 million range.
In a blog post, Ek said that, based on radio-industry data, Spotify assumes that over time more than 20% of all the streaming company’s listening will be non-music content.
“This means the potential to grow much faster with more original programming — and to differentiate Spotify by playing to what makes us unique — all with the goal of becoming the world’s No. 1 audio platform,” he wrote.
Gimlet Media had raised $28.5 million in funding from investors including WPP, Laurene Powell Jobs’ Emerson Collective, Cross Culture Ventures, Betaworks, Stripes Group, and Graham Holdings.
Anchor had raised $14.4 million, according to Crunchbase. Its long list of backers includes Accel, Acequia Capital, Mick Batyske, Scott Belsky, Betaworks, the Chernin Group, CrunchFund, Eniac Ventures, Nir Eyal, GV, Homebrew, Craig Kallman, Avi Muchnick, Omidyar Network, SV Angel, Questlove, and Vijay Vachani.