Spotifying is Changing the Game with Podcast Land Grab

Feb 9, 2019
Matthew Weinberg
Blog #3


Last Friday, I led an office visit with the CEO Club (the student club for entrepreneurship and startups at CBS) to Gimlet Media, one of the world's leading podcast companies. The visit ended abruptly when the Matt Lieber, the co-founder and President, was called away by a member of their public relations team to address a communications emergency.

The emergency was a news leak that reported Spotify's intentions to purchase Gimlet for approximately $200 million. This announcement, and subsequent purchase of Gimlet, is part of broader acquisition strategy by Spotify to buy studios that create original podcast content. Spotify's betting that the future of audio will be driven, in part, by public demand for podcast material. For anyone paying attention to the sector, this dovetails with significant VC investment in podcast in 2017 and 2018.

With regards to marketing, it presents a potential change to the audio advertising business model. Currently, most podcasts are free and drive revenue via advertising. Spotify's podcast land grab indicates a shift in the model to something more akin to Netflix, indicating the Netflix of podcast moment is here. Advertising models may fall prey to a premium model, which Netflix has proven is an attractive business model. Already, other podcast startups, such as Luminary Media, are taking this approach. Spotify believes that not only music, but original story telling and other compelling podcast content, has the potential to be a boon to subscriptions.

The acceleration of podcasting into the premium model might spell the demise of free high caliber content but it may also spell the demise of any podcast advertising model. Will customers care and be willing to pay a fee to enter a walled garden of podcast content? Or will they seek free content and endure the current advertising structure? In any event, the change Spotify has initiated in the podcast sector will have a lasting impact on how we consume non-music audio content.