Spotify bets big on podcasting

Spotify Technology acquired podcasting companies Gimlet Media and Anchor FM, a declaration that their specialty is the next big area of growth for the world's largest paid music service.

Spotify didn't disclose the prices it paid for the companies, though previous reports said it would be paying more than $200 million for Gimlet.

That alone would be the biggest acquisition in Spotify's history.

The Swedish company has been investing in podcasting for a few years, funding exclusive shows from comedian Amy Schumer and rapper Joe Budden.

But the deals for Gimlet, a producer of podcasts, and Anchor, a services company, signal the medium has progressed from a hobby to a key focus for Spotify.

'Spotify is already one of the world's most-used apps, but we see an opportunity apart from where we sit today,” CEO Daniel Ek wrote in a letter. 'This opportunity starts with the next phase of growth in audio - podcasting.”

The investment opens up another front of competition with Apple, the most popular distributor of podcasts.

Apple Music is the second-most-popular paid music service, after Spotify.

Spotify said it plans to spend as much as $400 million to $500 million on acquisitions this year, including Gimlet and Anchor, and is in the midst of negotiating others.

Stockholm-based Spotify announced the deals on Wednesday, the same day it reported its first profit ever, as well as strong subscriber growth. The company added 16 million new users in the fourth quarter of 2018, nine million of whom pay for its premium services.

Both of those numbers exceeded analysts' forecasts.

Spotify grew its user base by nearly 30 percent last year despite growing competition from Amazon.com, Apple and YouTube.

In podcasting, Spotify is making a big bet on a relatively unproven medium. Total sales from the industry are still in the hundreds of millions of dollars.

But Spotify believes it is getting in on the ground floor.

'The engagement numbers have been growing exponentially,” McCarthy said. 'If the trends persist, many people will be investing in the space. As we have success, we will double down.”