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08 Feb 2019

Spotify is building Netflix-meets-radio

Excerpt via AngelList

Spotify’s strategy, it seems, is to build something between radio and Netflix. Like radio, Spotify can be the portal by which every consumer discovers and enjoys audio content—hence its acquisition of Gimlet, one of the most popular podcast producers. At the same time, Spotify seems increasingly interested in producing original, Spotify-exclusive content—hence the acquisition of Anchor, which claim to be responsible for 40% of the world’s new podcasts.

Spotify announced two major acquisitions this week:

  1. Gimlet Media, the content creators behind the Startup and ReplyAll podcasts, purchased for $230 million
  2. Anchor, the production and distribution platform for podcast creators, purchased for an undisclosed sum

Both acquisitions were unexpected. Spotify has never before purchased a company focused on creating content, and Gimlet’s acquisition is one of the biggest in podcast history. Moreover, Spotify reportedly plans to invest up to $500 million in the podcasting space, meaning Gimlet maybe just the tip of the iceberg.

This move is interesting for a number of reasons. For starters, while Spotify has long dwarfed Apple Music in number of subscribers, Spotify has been late to the podcasting game. For a long time, podcasts—a name literally taken from the iPod—were an afterthought at Spotify, as Chief R&D Officer Gustav Söderström explained to TechCrunch:

“The user experience was really poor,” he says. “There was no 15-second skip. In spite of that, we saw a lot of users listening to podcasts. It was kind of unexpected, and we didn’t really understand why. It turned out people really wanted to have podcasts in Spotify with their music. If you look at radio, it’s not that surprising.”

The parallel to radio is key, and it’s echoed by Spotify CEO Daniel Elk, who when talking about the recent podcast acquisitions said, “…people still spend over two hours a day listening to radio—and we want to bring that radio listening to Spotify, where we can deepen engagement and create value in new ways.”

Spotify’s strategy, it seems, is to build something between radio and Netflix. Like radio, Spotify can be the portal by which every consumer discovers and enjoys audio content—hence its acquisition of Gimlet, one of the most popular podcast producers. At the same time, Spotify seems increasingly interested in producing original, Spotify-exclusive content—hence the acquisition of Anchor, which claim to be responsible for 40% of the world’s new podcasts.

If Spotify can successfully execute on this strategy, it could become the default platform for both the discovery and production of original audio content. There is a potential virtuous cycle where the best podcasters use Spotify to create and distribute their content, and more and more listeners depend on Spotify for access to it.

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