Spotify is in talks to acquire Gimlet Media, one of the leading podcast production houses. If this deal completes, it will signify a major change in the trajectory of podcasting as an industry. The significance of the deal goes well beyond that of the eye-opening $200 million valuation being discussed.
Gimlet has raised approximately $28.5 million in venture funding from investors including WPP, Stripes Group, LioneTree Partners, Graham Holdings, Betawarks, Cross Culture Ventures, and Lowercase Capital. Two years ago, the startup was reportedly valued at roughly $70 million.
Podcasting has also become a true mainstream media channel in terms of listenership: the latest Edison Research Infinite Dial study puts monthly listenership at 73 million, almost comparable to that of streaming music or streaming video. Yet unlike traditional media businesses (though like digital-native businesses), there hasn’t been much consensus on how all of those podcasts are going to make money. Revenue sources exist, but they are mostly hard to scale.
At its core, Spotify offers a product that isn’t very different from products from Apple and Google. Yet while those tech giants can cross-subsidize their music services with other products (and ultimately live without their music services if they have to), Spotify has to make a profit from its service alone. Apple, in particular, has been actively looking for ways to eliminate Spotify from the market. Spotify’s “pure play” state enables it to focus on delivering a great music experience, as others (particularly Google) can’t, but it puts the company into a corner.