Spotify makes two acquisitions as it looks to diversify its offerings

Spotify makes two acquisitions as it looks to diversify its offerings
Spotify has just acquired two podcasting companies – Gimlet Media and Anchor. The move should help the streaming giant shore up its non-music content. It’s also a lesson for subscription businesses about the importance of diverse offerings. Shashank Venkat presents the details 

It’s a good time to be in the shoes of Spotify CEO Daniel Ek. The company just reported its first profitable quarter while its paid subscriber count is now close to 100 million. There couldn’t have been a better moment for the company to announce two strategic acquisitions – Gimlet Media and Anchor – and signal its broad ambitions to Wall Street. With the company confident that 20% of all Spotify listening will be non-music content in the future, the acquisition of these two podcasting companies makes a lot of sense.
Both Gimlet and Anchor are significant players in the podcast world. The former is counted among the best content creators in the audio space with celebrated shows such as Homecoming and Reply All part of its stable. Anchor, on the other hand, is a giant content distribution and monetisation platform. These businesses will help Spotify rise up the podcasting charts very quickly.

Spotify’s journey towards podcasts

In many ways, Spotify’s two new acquisitions were totally unexpected. The company has never acquired a content creation business before, but with Gimlet it has made one of the biggest acquisitions in the podcasting space. According to reports, Spotify spent $230 million on the Gimlet acquisition, however no numbers have been made public for the Anchor acquisition. Moreover, Spotify was somewhat late to the podcast party with the company opening up its podcast submission program only last October. Contrast that with rival Apple which has been supporting podcasts since 2005!
In fact, Spotify admitted that the user experience for podcasts was not up to the mark on its platform. Despite this, the company has found a lot of users tuning in to its podcasts. With these two acquisitions, the company has now signalled that it is getting in to the podcasting space in a big way. And why not? The US podcast ad market was worth a total of $314 million in 2017 and is one with a lot of untapped potential for growth. The podcast advertising market is expected to grow to $659 million by 2020 in the US alone.

Borrowing a leaf out of the Netflix playbook

Netflix is truly the platform to look up to for most subscription businesses. The company offers diverse content to its subscribers which keeps them hooked at all times. It also constantly experiments with content formats such as the interactive show Black Mirror: Bandersnatch. With Gimlet and Anchor, Spotify aims to bring the Netflix experience to audio with new content offerings and potentially attract new subscribers who are essentially not music lovers.
In addition, Spotify recognises that original content is the way to go for streaming businesses. Both Gimlet and Anchor will help Spotify in this mission by offering a lot of new and exciting content to their listeners.
And just like Netflix, Spotify also offers a better content discovery experience to listeners. Its growth as the leading music streaming platform has been due to its superior technology and catalogue of content, and by leveraging this experience and expertise in the podcasting space, it will solve a major problem for listeners. If Spotify can indeed deliver on its promise, it can become the default non-music audio platform for both listeners and content creators.

Lessons for subscription businesses

Companies like Netflix and Spotify underline the value of two important subscription elements – diversity and engagement. Whether you are a B2B subscription business or a B2C one, there are always ways to broaden your offerings and grow your addressable market. Look for new and interesting ways you can diversify your business and offer more value to your customers. 
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