Spotify officially announced the acquisition of two companies as it aims to gain ground in the podcasting industry. One of the two firms bought by the music streaming service is Gimlet, a company founded by Alex Blumberg and Matt Lieber in 2014. Gimlet produces several popular podcasts including Reply All, Startup, and Homecoming.
Spotify noted in its press release that aside from the podcast content, the acquisition of Gimlet will also bring the startup’s development, production, and advertising capabilities to the streaming service. Another company that Spotify recently acquired is Anchor, a tech firm that offers tools for podcast creation, publication, and monetization. Among the services offered by Anchor to producers include easy distribution of podcasts to numerous platforms, matching content with sponsors, remote co-hosting through its mobile application, and audience analytics.
Even though the Spotify's announcement provided limited information about the acquisitions, the streaming service was clear on why it acquired the two companies. In its quest to become the leading audio platform in the world, Spotify aims to become both a premier producer of podcast content and the preferred platform of podcast creators. At this point, Spotify intends to expand its library of exclusive podcasts, which is currently dominated by talk shows related to music, while the acquisition of technology from Anchor will enable the streaming service to supply the necessary tools that content creators need to produce podcasts on its platform.
Background: While the press release for the acquisitions does not show how much Spotify paid for the two companies, earlier reports mention that the streaming service paid at least $200 million to buy Gimlet. This amount is higher than the $70 million valuation of the company, according to recent articles. However, no information is available about the price Spotify paid for Anchor.
Even though the company made its mark as a streaming service, Spotify aims to increase its library of exclusive content. The tech firm repeatedly attempted to create its own video content, to the point of hiring people with television and video production experience, although it seems that the company’s digital video plans did not succeed.
Now, Spotify focuses on audio content to boost the portfolio of content exclusively available on its platform. Even though the ad revenue generated by podcasts is significantly lower compared to digital videos, the industry has seen massive growth over the last few years, and more content creators have started offering their own podcasts.
Aside from Gimlet and Anchor, Spotify acquired several smaller companies over the last few years. Among the tech firms that the streaming service bought out include Soundtrap, a company that offers tools for creating podcasts on multiple types of device, and Loudr.fm, which provides solutions for licensing audio. However, it is likely the first time that Spotify acquired a content company.
Impact: It is often important for a company to diversify its revenue sources. Spotify aims to branch out from its main business of streaming music to find new revenue streams with much higher profit margins. Meanwhile, by offering tools for podcasting, more content creators may start publishing their works on Spotify’s platform.
By increasing its exclusive content library and expanding the podcast portfolio that it hosts, these developments may entice more users to switch or stay on Spotify’s streaming platform.