Spotify has bought two podcast firms and plans to spend up to $500m (£385m) on further acquisitions in an attempt to move beyond its music streaming roots for new growth.
The Swedish company has acquired Gimlet, the firm behind a string of popular podcasts including Homecoming, which was adapted into an Amazon TV series starring Julia Roberts.
It has also acquired Anchor, a platform that allows individuals and companies to create, publish and monetise podcasts. No price was disclosed for either deal, but Gimlet reportedly cost Spotify $230m.
Daniel Ek, the founder and chief executive of Spotify, said his company needed to break into the small, but fast-growing podcasting market in order to tap revenue streams beyond its core music service.
“We believe it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content,” he said in a blog post. “This means the potential to grow much faster with more original programming.
“Our core business is performing very well. But as we expand deeper into audio, especially with original content, we will scale our entire business.”
News of the deals came as Spotify revealed its first ever quarterly profit. Operating profit for the final three months of 2018 was €94m (£82m), but it expects to slip back into the red this year. The company said its loss guidance for 2019 had increased from €200m to €360m, despite paid subscriber numbers being projected to rise from 117 million to 127 million.
Total monthly user numbers rose 29% year on year to 207 million in the fourth quarter. Paying subscriber numbers, the key metric watched by investors and analysts, jumped at an annualised rate of 36% to 96 million. Total revenues rose by 30% to €1.5bn.
Spotify is a global leader in music streaming but is a low-margin business, with the majority of revenues paid out in royalties to music companies. The company said it would not seek to raise the prices of its monthly packages as it added podcasting content to its service.
“Users love having podcasts as a part of their Spotify experience,” said Ek. “Our podcast users spend almost twice the time on the platform, and spend even more time listening to music. We have also seen that by having unique programming, people who previously thought Spotify was not right for them will give it a try.”
