Spotify has now acquired Gimlet and Anchor to enter the growing Podcast market. Furthermore, it plans to spend more than 500 million USD to continue building its new content portfolio. Although this Swedish company has had a tremendous user base that led to a total operating profit of 82 million USD in the last quarter of 2018, the margins in the music streaming business are quite low. This is because a fair amount of the profit ends up being paid as royalties to the artists. Keeping in mind its consumer-centric outlook, Spotify does not plan to increase its subscriptions costs, even with the new additions of podcasts.
Brooklyn based podcast network, Gimlet, has been doing a great job of hosting well-scripted and engaging shows. In fact, one of its shows, Homecoming, was picked up by Amazon Prime as a web series and is now starring Julia Roberts. Since then, Gimlet has been the star of the podcast community. Although the figures remain undisclosed, it is estimated that Spotify bought Gimlet for close to 230 Million USD. This figure has not been confirmed, though.
Anchor is another Podcast network that has been acquired by Spotify, for an undisclosed amount. This network allows users to host their own channels and monetize their content. According to Daniel Ek, the founder of Spotify, the podcasting market may be small as of now, but it is growing very quickly. Spotify has identified the opportunity to expand its revenue streams as well as break into a business that may offer higher profit margins than streaming music.
Spotify’s growth analytics
Spotify has been growing steadily since its launch as it allows users to discover and enjoy new music at a nominal monthly subscription fee. According to the company’s own reports, they have enjoyed an annual growth rate of 36% almost consistently. Its paid subscribers are projected to increase in 2019 from 117 million people to 127 million people. However, in spite of all this, its loss guidance set for 2019 has also increased from 200 million Euro to 360 million Euro.
Why is Spotify interested in acquiring podcasts?
According to Daniel Ek, their core users enjoy being able to listen to podcasts on Spotify, and these users spend twice as much time on the platform when compared to others, and would also listen to music while they were there. By breaking into the podcasting market, Spotify can gain the consumers that were not interested in music streaming and were looking for content. As a result, they stand to increase their consumer base and profits quite substantially.
As mentioned earlier, Spotify plans to spend 500 million USD more in order to continue building this side of their platform. This investment will certainly pay off as more and more consumers are turning to podcasts. Check out our previous article about why podcasts are the future to know more about this type of audio content, and why giants like Spotify are even interested!