Spotify has agreed to buy two podcasting companies

Spotify has agreed to buy two podcasting companies as it seeks to diversify from the costly business of music streaming. The Swedish group is to buy Gimlet and Anchor as part of plans to spend between $400 million and $500 million on deals in 2019. Gimlet cost $230 million, Spotify’s largest acquisition to date. The spree is likely to affect profitability this year. Spotify expects gross margins of between 22 per cent and 25 per cent in 2019, compared with 26.7 per cent at the end of last year. The company added 9 million subscribers in the final three months of the year, ending 2018 with 96 million paying customers — just above consensus forecasts for 95 million… Gimlet produces popular podcasts like Homecoming and Reply All. Anchor provides services for people to make and distribute podcasts… Spotify is the leader in paid music streaming by a wide margin but has to pay back the majority of its revenues in royalties to the music labels that own its song catalogue. Podcasts are one area where Spotify could escape this punishing cost structure, while also luring more people to its platform to keep them listening longer… Still, Spotify is pouring money into a podcasting business that is relatively small. Advertisers spent only $314 million on podcasts in 2017… compared to tens of billions on video.
Anna Nicolaou and Andrew Edgecliffe-Johnson