Why Is Music Streaming Giant Spotify Spending $230 Million on a Podcast Company?

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In a move that shows the increased significance of the podcast industry, a recent report from the Wall Street Journal revealed that music streaming juggernaut Spotify is in talks to purchase podcasting company Gimlet Media.

According to the report, the bid from Spotify is in the region of $230 million, and it would help the Swedish based company diversify its product offering beyond music streaming into a podcasting market that it’s been interested in for a while.

Spotify Gimlet Media

The Potential in Podcasts

Spotify is home to about 200 million users, all of whom seem satisfied with the platform’s ability to stream their favorite tracks on demand, but they could desire more. However, while music streaming is majorly controlled by three services (Spotify, Apple Music, and Pandora), the podcast industry is still a nascent one, and Apple, which currently holds a majority dominance over the industry, doesn’t seem to pay much attention to it.

The industry has been growing too. In 2017, the podcast industry generated $315 million in revenue, which pales in comparison to the $7.4 billion generated by streaming services. However, while the streaming revenue grew 10.2 percent from its $6.7 billion figure in 2016, the podcast business saw explosive growth, moving from $169 million to $314 million in revenue, according to a jointly conducted report from the Interactive Advertising Bureau and PwC. The researchers estimate the podcast industry would see a triple-digit growth going forward.

Spotify and the Podcast Industry

Spotify first tried its hands on the podcast market as a way of convincing users to stick around and spend more time on the platform, as opposed to streaming songs on its platform and then switching to iTunes for podcasts.

Ultimately, podcasts can potentially provide an intuitive way of increasing average listening time, improve revenues from advertising and help Spotify diversify its offerings.

“The first step was to make sure that we’ve got the world’s best podcasts on Spotify, and integrated the experience into the service in a way that allowed people to build habits and behavior there,” Head of Spotify Studios Courtney Holt, noted at the Consumer Electronics Show (CES) in Las Vegas.

What we started to see is that the types of podcasts that really were working on Spotify were the ones where they were authentic voices… so we just decided to invest more in those types of voices.

Still, Spotify’s podcast efforts remain quite insignificant. According to the company, the podcast arm has 150,000 podcasts. The 550,000 housed by Apple majorly dwarfs this.
Some of the numbers “boasted” by Spotify have been made possible due to its offerings, including comedian Amy Schumer’s 3 Girls, an exclusive weekly podcast hosted by Joe Budden, and Jemele Hill’s upcoming Unbothered series. The platform also released Chapo, a podcast from Vice News about the Mexican drug kingpin El Chapo.

A Reasonable Match

Gimlet, which was founded by Matthew Lieber and Alex Blumberg back in 2014, has become a powerhouse in podcast productions, with hits such as Homecoming, The Nod, Reply All and StartUp to boast off.

The acquisition of a dedicated podcast studio like Gimlet will allow Spotify to continue with developing its lines of original content, benefiting from additional users and advertising revenue, as well as the effect of whatever else that intellectual property could be used for in the future.

Also, it will give Spotify the ability to keep users locked on its service, as opposed to having them come for the music and migrate back to Apple Podcasts or Stitcher for podcast content.

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Based in the UK, Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system. Follow him on Twitter: @adejimi or Contact

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