Spotify Reportedly in Talks to Purchase Gimlet, a Podcasting Company, for $200 Million

Spotify may be pushing its podcast initiative into overdrive.

Several weeks ago, in a note trimming Spotify’s price target to $170, Morgan Stanley maintained the company’s Overweight rating.

Explaining how the streaming music giant can turn things around, the firm noticed several things.

First, Spotify users have “great loyalty to the platform.”  They consume 4.4 hours of content per week.  Apple Music’s users, on the other hand, consume 3.7 hours.  Amazon Music Unlimited users consume 1.7 hours.

In addition, Spotify has the highest reported satisfaction among streaming music services.  Two-thirds of all music streaming also happens in playlists, which the company dominates.

Yet, the streaming music giant has neglected one area where competitors shine – podcasts.

Spotify’s users, Morgan Stanley noted, “love podcasts more than any other subscriber group.”  Users who pay for the service listen to 5.2 hours of podcasts per week.  That’s 48 minutes more than users on Apple Music.  Yet, most users haven’t consumed podcasts on Spotify.

That may soon change, however, with a new acquisition.

Can Gimlet Media help the streaming music giant take advantage of the rise of podcasts?

According to the note from Morgan Stanley,

While Spotify’s paid users spend more time listening to podcasts than others, Apple remains the platform with highest overall podcast listening – underscoring the importance of podcast leadership for Spotify long-term.

According to a new report, Spotify wants to branch out of the streaming music business.  So, the company will pay more than $200 million to purchase Gimlet Media.

The podcasting startup produces popular shows, including Reply All and Crimetown.  Gimlet also produces shows for advertisers, which includes Gatorade.  Listeners reportedly download more than 12 million podcasts each month.  The startup also has hundreds of employees.

Recently, the podcasting startup has moved into TV production.  Gimlet recently made a deal that turned Homecoming, initially a scripted podcast, into an Amazon TV show starring Julia Roberts.

Sources say the streaming music giant is now in advanced talks to acquire the startup.  Gimlet last had a reported valuation of $70 million.  Spotify would pay nearly triple that amount in cash.

Asking how the acquisition would affect both companies, Hot Pod, a music industry podcast site, wrote,

How does Gimlet’s staff — which now numbers well north of hundred in the headcount — integrate into Spotify?  Who stays, who leaves?  How will shows be situated within the company?  Will Gimlet’s programming be exclusive on Spotify?  (Probably, probably.)

Speaking about the company’s long-term strategy with the acquisition, Daniel Levine, a former data staffer at Spotify, explained,

Why is Spotify looking to buy Gimlet?  Three reasons: (1) Differentiate through unique content, (2) Earn better margin with non-music content, (3) Capture the ad dollars moving off radio, DOUBLE the size of the music market in the US.