Spotify is going all in on podcasts with 2 acquisitions, says it will spend hundreds of millions more

Daniel Ek, chief executive officer of Spotify | Louis Lanzano | Bloomberg | Getty Images

Spotify made a major step into podcasting on Wednesday, announcing plans to acquire privately held podcast producers Gimlet Media and Anchor. The music streaming service said it plans to spend up to $500 million this year on more podcasting acquisitions.

Terms of the deals were not disclosed, but late last week, Recodeand Vulture podcast critic Nicholas Quah reported Gimlet would sell for north of $200 million. According to Quah, those terms would make it the largest podcast industry acquisition to date.

“These acquisitions will meaningfully accelerate our path to becoming the world’s leading audio platform, give users around the world access to the best podcast content, and improve the quality of our listening experience as well as enhance the Spotify brand,” Daniel Ek, Spotify co-founder and CEO, said in a statement.

In a separate post published on Spotify’s blog, Ek said he anticipates more than 20 percent of listening on Spotify will eventually be “non-music content.” Gimlet’s vast array of fiction and non-fiction shows, including “Reply All,” “Startup” and “Homecoming,” which was recently adapted into a Netflix series, will help add to Spotify’s growing library of podcasts. Gimlet already hosted its second season of the popular true crime podcast “Crimetown” exclusively on Spotify beginning in October 2018. Gimlet has recently expanded its focus into pitching adaptations of its podcasts to Hollywood.

Anchor brings a different part of the equation to Spotify with its easy-to-use podcast creation technology. Anchor serves as a platform for podcast creators to make and distribute their shows. Anchor had 15 billion hours of content on its platform in Q4, Ek said in the blog post.

“Gimlet and Anchor will position us to become the leading platform for podcast creators around the world and the leading producer of podcasts,” Ek wrote.

Spotify was down about 6 percent Wednesday morning following the announcement and the release of its fourth quarter 2018 earnings report. While it beat analyst expectations for operating profit in the quarter with a profit of 94 million euros ($107 million) compared with a mean forecast for a loss of 16 million euros in a Reuters poll of analysts, Spotify saw average revenue per user (ARPU) fall 7 percent in the quarter, as the percentage of cheaper subscriptions rose and as growth in relatively lower ARPU markets outpaced areas with higher ARPU.

Spotify’s slowing sales numbers may have contributed to the dip in the stock as well. Sales grew 29 percent in 2018, down from 39 percent growth in 2017 and 52 percent in 2016.

-Reuters contributed to this report.

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