POV

POV: Spotify Podcast Acquisitions 2019

Background:

Spotify recently announced the purchase of podcast firms Anchor and Gimlet and said that it has plans to spend up to $500m further on acquisitions. In a separate move, an update to its Terms and Conditions will start to see the termination of accounts and users that use ad blockers.

Details and Implications:  

Podcasts are the hot ticket in audio right now – nobody knows exactly how many people are now listening to podcasts across platforms but the opportunity is huge. Apple alone confirmed that it hosts more than 550,000 active podcasts. A joint PWC / IAB podcast revenue study found that US podcast advertising revenue is expected to grow more than 110% by 2020, to $659m from a figure of $317m in 2017, with the financial services, direct to consumer and arts and entertainment brands the biggest spenders.

With the purchase of both Anchor and Gimlet, Spotify is positioning itself as the destination for podcasts. It has been reported that the deal with Gimlet, the four-year old studio behind popular podcasts such as Homecoming, Reply All, and Crimetown, cost $230m, the largest deal ever for a Podcast creator. Last year, iHeartMedia bought Stuff Media, the company behind podcasts Stuff You Should Know and Atlanta Monster for $55m. Add this to the purchase of Anchor - a platform that helps users create their own podcasts – and it would appear that Spotify is gearing up to be the YouTube of audio – where users can create podcasts, publish them on Spotify and monetize them via ads.

“With the world focused on trying to reduce screen time, it opens up a massive audio opportunity” said Daniel Ek, CEO and Founder of Spotify in a blog post on the purchases. "Based on radio industry data… 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.”

The rise in popularity of podcasts is such that we are now seeing many make the leap to television, with HBO turning popular crime podcast Serial into a show due to be released in April and Amazon Prime doing the same with Homecoming – a non-fiction thriller podcast turned into star-studded TV show.

Away from podcasting Spotify has also made an important update to its terms and conditions. From March 1 anyone using ad blockers on Spotify is at risk of having their account terminated. Last year Spotify began using ad blocking detection software after it discovered that just over 1% of free subscribers were using tools to listen ad-free. ‘Offenders’ were given notice to stop this practice.

The new rule states: ““Circumventing or blocking advertisements in the Spotify Service, or creating or distributing tools designed to block advertisements in the Spotify Service…may result in immediate termination or suspension of your Spotify account.”

Summary:

At present the podcast world is open, with low barrier to entry and no dominant player. The acquisition of top podcast content creators and a nascent user generated content approach that can be monetized by a global platform is a strong indication that there could soon be a dominant global player in the podcast market and a possible upcoming battle for the best podcast content brands and technology companies between the major players Spotify, Apple (iTunes), Google (Google Podcasts for Android) and Amazon (which you can’t discount through Audible, although mainly focused on audio books right now).

Further Reading:

Recode | Spotify Newsroom | IAB | Fortune | TechCrunch