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Tuesday 20th March 2018

The Netflix of Audio: Spotify Plans $500m Investment in Podcasts

Science & Technology

Benjamin Schmidt - 7Dnews São Paulo

Wed, 06 Feb 2019 20:50 GMT

Spotify CEO Daniel Ek announced the ambition of the Swedish streaming firm was to become the world’s leading audio content company this week after it announced the purchase of podcast makers Gimlet and Anchor.

In a blog post published on February 6th, Ek wrote “it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content,” adding that Spotify has "the potential to grow much faster with more original programming...with the goal of becoming the world’s number one audio platform."

By moving into podcasting, Spotify hopes to provide more exclusive content to premium subscribers and encourage its ad-supported free users - currently 54% of its user base - to decide to upgrade. Since the company pays out most of its current revenue in royalties to artists and music industry groups, podcasts could help boost its income and strengthen its hold on the audio streaming sector. 

Many observers are comparing the move to the decision by Netflix to move into creating original content.

“Spotify is taking the Netflix model," wrote Nick Summers at Engadget.com. "Podcasts… Spotify can buy and own as exclusive content. If it green-lights the right shows, it could pull users away from third-party podcast apps and then slowly persuade them to take out a premium subscription."

In a similar vein, Barry McCarthy, the former CFO of Netflix, told the Financial Times that the decision by Spotify to invest in original audio content was "like our first investments at Netflix in streaming [video] content."

In his blog post, Ek lauded the podcast companies purchased by Spotify as "best-in-class" content creators. Gimlet is behind the popular podcast Homecoming which has since been made into a critically successful show on Amazon Prime Video. Anchor, on the other hand, has focused on enabling individual creators to create fresh new content.

"Gimlet and Anchor will position us to become the leading platform for podcast creators around the world and the leading producer of podcasts," Ek said, and added that Spotify would be spending up to $500 million on additional acquisitions in the coming year.

The announcement came as Spotify's Q4 results for 2018 showed the firm's first-ever positive operating profit, net income, and free cash flow. In the past year, the Swedish streaming company has increased global monthly users by 29% to 207 million and raised total revenue by 30% to $1.7 billion.

Europe