If reports from various media outlets, including Recode and the Wall Street Journal, are anything to go by, the Swedish music streaming company Spotify is currently in acquisition talks with the start-up podcast company Gimlet Media. It is being alleged that Spotify is willing to pay north of $200 million to acquire the podcasting giant, with one source alleging that the actual price is $230 million. However, it is worth noting that the situation is fluid right now, and the deal has not been finalized yet.
The Brooklyn-based company Gimlet was founded in 2014 by the Planet Money co-founder Alex Blumberg and WNYC producer Matt Lieber. The company is known for popular podcasts such as Reply All, Startup, and Homecoming, which was later turned into a Julia Roberts-starred Amazon TV show. To date, Gimlet has raised nearly $28.5 million in funding from different investors including Emerson Collective, Betaworks, and WPP. The company last raised money in 2017 and is currently valued at $70 million.
Needless to say, Gimlet is a known name in the nascent podcasting industry and the takeover would allow Spotify to break into the audio business. The company had previously tried its luck with video but that didn't really work out. The digital music service provider has been pretty vocal about its podcasting ambitions in recent months and the acquisition would help the company add to its exclusive podcast library, which consists of talk shows revolving around music right now. It remains to be seen if the acquisition would make any of Gimlet's podcasts Spotify exclusive.
Compared to the digital video industry, that generated 11.9 billion in ad revenue in 2017, the podcasting industry is still a small one, managing to rake in about $315 million in the same year. However, it's growing by leap and bounds, attracting the attention of bigwigs such as Vox Media who want to tap into the new revenue stream. Although Apple is the largest podcast platform right now, the Cupertino giant hasn't revealed any intentions to sink its teeth any deeper in the podcasting business.
Spotify, on the other hand, is a predominantly audio company with a user base of 200 million. The company has been trying to diversify its offerings since quite some time now and if the deal with Gimlet Media goes through, the streaming service would get a boost. It is worth pointing out that Spotify has already entered some deals to bring various original shows to its platform, including Amy Schumer's 3 Girls, 1 Keith.
This would be the first time that Spotify acquires a content company and would also be one of the biggest takeovers in the podcasting industry. It has previously acquired smaller streaming companies such as the online recording studio Soundtrap and music-rights solutions provider Loudr.fm.
Creating its own content would help Spotify attract more users and open up a new revenue stream which promises a bigger profit margin than the music that's licensed from record labels. Moreover, original content could keep the user engaged and dissuade them from switching to other platforms such as Stitcher and Apple Podcasts to listen to podcasts.