Spotify CEO Daniel Ek said the company is already the second largest podcast distribution network in the world and is set to pour resources into a bid to reach top spot.

By Daniel Herborn

Posted on February 7, 2019

The music streaming giant has announced the acquisition of podcast startup Gimlet Media and Anchor, which helps creators publish and monetise podcasts, as it makes an aggressive move into non-music content.

The acquisitions are part of a massive US$500 million spending spree Spotify is planning as it aims to become the leading source of podcast content.

It paid a reported US$230 million for Gimlet Media. The company’s podcasts include StartUp, Reply All, Homecoming and Crimetown. Its stable of shows has achieved both commercial viability and critical acclaim for their prowess in investigative journalism and storytelling.

Spotify used its earnings call to map out its future as a podcast platform

Spotify CEO Daniel Ek highlighted the recent acquisitions at the company’s earnings call, saying they would facilitate the streaming giant offering “the best content, the best discovery, and the best user experience for consumers.”

“We are also positioned to become the leading platform for podcast creators as well as the leading producers of podcast globally,” he said. “We’re very confident about our path forward and we strive to become the world’s number one audio platform.”

Ek later told CNBC’s Squawk on the Street that purchasing Gimlet Media and Anchor “is really about expanding our mission from just being about music to being about all of audio and being the world’s leading audio platform.” He said that the growth in podcasts had been “phenomenal” in recent years.

The Spotify CEO also said the acquisitions would not materially impact the company’s long-term guidance on margins. “What we’re doing now in we’re investing in more original content on the platform,” he said. “That will broaden the appeal. It will broaden the engagement, which of course is a virtual cycle that then grows the platform and leads to more profitability long-term.”

Shares in Spotify were down after the company again said it did not anticipate turning a profit in 2019

Investors were down on the company in the wake of the earnings call and shares fell 7% after it again anticipated not to turn a profit in the coming year.

In large part, the anticipated losses Spotify will make (projected at between US$228 million and US$410 million) can be attributed to its ambitious plans to throw money into its campaign to dominate the podcast space. The expected losses come despite strong growth in total monthly active users (up 29%) and a marked increase in subscribers to its paid, ad-free sevice, which was up 36% compared with the same quarter in 2017.

The company now boasts 96 million paid subscribers and its users listened to some 15 billion hours of content during Q4.

Revenue is also growing and was up 30% compared to the same quarter one year ago, though it did come in slightly lower than analyst estimates. Revenue is projected to grow by as much as 29% (or US$7.7 billion). Its quarterly operating profit of US$107 million was its first ever.

Spotify is betting big that the podcast industry will become increasingly profitable on the back of greater advertising revenue. US podcasts collectively generated US$402 million from ads in 2018 and this figure is expected to reach US$659 million by 2020.

Header image credit: Rosa G.