In not one but two of the biggest tech acquisitions of the year so far, music streaming giant Spotify has announced its intentions to dominate the world of podcasts.
Spotify announced the purchases of podcast creation platform Anchor and content creator Gimlet Media on Wednesday. The terms were not announced but CNBC reports that Gimlet was being valued at around $230 million pre-acquisition (according to Vulture), and Spotify has talked about committing around $500 million in M&A spend towards podcasts this year.
Gimlet is just four and a half years old but is already responsible for several highly successful podcasts, including Reply All and Startup, as well as Homecoming, a fictional podcast that was adapted by Amazon Video last year and starred Julia Roberts.
In a blog post titled 'Audio First', Spotify CEO Daniel Ek announced his company's intentions, saying: "Based on radio industry data, we believe it is a safe assumption that, over time, more than 20 percent of all Spotify 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 number-one audio platform."
More specifically on the acquisitions he continued: "Gimlet is one of the best content creators in the world" and "Anchor has completely reimagined the path to audio creation, enabling creation for the next generation of podcasters worldwide — 15 billion hours of content on the platform during Q4."
"Gimlet and Anchor will position us to become the leading platform for podcast creators around the world and the leading producer of podcasts," he added.
Ek continued to detail how under the Spotify umbrella these two acquisitions will allow them to "offer better discovery, data, and monetisation to creators."
"With the addition of Gimlet and Anchor, Spotify will now become the leading global podcast publisher with more shows than any other company," he concluded.
Podcasting remains a nascent and fractured industry, with no dominant platform and few simple routes to monetisation. Many podcasts are small shops which produce their own content and publish to the hands-off Apple and Google podcast apps or use Acast to embed what are essentially programmatic ads. Most successful podcasts negotiate their own ad deals and do live reads.
That being said, podcasts are also proving effective business in a media landscape where written content and video have proved tricky to monetise in the age of the Google/Facebook digital advertising duopoly. In the US, the Wall Street Journal reported that Bill Simmon's young media company The Ringer is bringing in the majority of its revenue via podcasts, $15 million in 2018 to be exact.
This is the market opportunity Ek is talking about.
What does this mean for the industry?
With these moves Spotify sets itself up to dominate the still-nascent podcasting landscape, giving podcasters an easier route to deliver on their platform than any others, as well as buying a steady stream of (hopefully) quality content in Gimlet Media.
In an interesting Twitter thread on the topic, former head of product at Gimlet, Nathan Baschez, writes: "Advertisers will increasingly buy from Spotify, and move away from working directly with podcast creators... This basically mirrors what happened with Facebook and web publishers."
He also posits: "Spotify will pay podcast creators in a similar way that YouTube pays its creators."
Nicholas Quah, a podcast critic and industry watcher for Vulture wrote that the industry reaction has been generally positive, with some calling it "the turning point for the industry that many have been waiting for".
However, there is scepticism surrounding "what Spotify represents, which is a future where podcasting is much less open and democratic than it originally was".
These are natural reactions to a major corporation stepping into an industry that has long been the domain of bedroom content creators and independent companies able to negotiate their own terms in the market.
For many it will feel like the fun is over now that the capitalists are bulldozing in with talk of "better discovery, data, and monetisation to creators," as Ek wrote earlier.
"For the longest time, podcasting was defined by those low stakes: it was something that a steadily growing number of people really loved, but nobody knew how to make money off of," as Quah put it.
"Spotify's big swing likely changes all of that. By virtue of being a massive new player that's willing to spend money to rapidly grow the medium on its platform, the company is greatly raising the stakes. As a result, we could see an arms race of some sort, as Spotify's rivals consider making similar moves and as podcast publishers work to raise their profile in whatever way possible.
"This is probably the end of podcasting's Wild West era. What comes next is modernity, with all the good and bad that can bring," he concluded.