Spotify is ready to branch out of the music streaming business and is in advanced talks to purchase Brooklyn-based startup Gimlet Media for $200 million. Gimlet Media has been known to produce popular shows like Reply All. Its attempt to venture into television production by creating a scripted podcast took the form of the Amazon TV Original, Homecoming, starring Julia Roberts. The startup has also made shows for popular advertisers like Gatorade.
The move may be a tripartite boost for Spotify, Gimlet Media, and the podcasting industry as a whole. The last time Gimlet Media raised money was back in 2017 via funding, bringing the company’s valuation up to $70 million. Sources suggest that Spotify shall pay more than double that value (a whopping $200 million) if it ends up acquiring Gimlet Media.
Spotify’s investment in Gimlet Media will also boost the still nascent podcasting industry, which has yet to attract serious investors. While it is true that Apple is a leading podcast distributor, the company barely depends on it for revenue. And the industry has an ad model that generated $315 million in 2017, which is quite low when compared to the $11.5 billion raised by digital video ads the same year. But it is showing quick growth, thereby attracting publishers and platforms intending to tap into newer revenue streams.
Finally, this is the first time Spotify will acquire a content-creating startup following the comparative failure of its attempt to venture into the video business. It has already started promoting podcasting to its 200 million users, besides doing exclusive one-off podcast deals with celebrities like Amy Schumer. Furthermore, while the music business has three giants with real leverage for licensing their stuff and controlling it, the podcast industry, with its comparative freshness, gives Spotify a freer rein to establish dominance.
Spotify shall release its next quarterly earnings on February 6th, 2019.