The company has cautioned that its data is still preliminary in nature, but the early indications are incredibly promising.
In other words, the plan is already starting to work, so Spotify is going to continue investing heavily in the initiative. Spotify says that podcasts are driving increased engagement across both music and podcasts, while improving conversion rates of free listeners to paid subscribers. In contrast, producing exclusive podcasts entails relatively low fixed costs, and if that content can garner a broad audience, then those costs are spread across a large number of users, reducing average cost and bolstering capital efficiency. The core music-streaming business is weighed down by hefty royalties that eat into profitability, since per-stream royalties are a variable cost that scale with usage - artists and record labels that represent them are paid every time their music is played. Spotify views podcasts not only as an expansion into another content category for its platform, but also as a way to improve its cost structure. With The Ringer's price tag, that brings the cost of Spotify's podcast shopping spree up to $600 million to $650 million. Spotify had already spent around $400 million in 2019 to acquire three podcast companies: Gimlet Media, Anchor, and Parcast. One of the big strategic questions around the deal was what value or utility Spotify could derive from The Ringer's other forms of content like written articles or videos, since CEO Daniel Ek has outlined his vision for Spotify to become "the world's number one audio platform" (emphasis added).
In this case, the deal requires Simmons to remain at Spotify for some unspecified period of time while providing protections for some of The Ringer's employees. It's not uncommon for acquisitions to incorporate later payoffs, which can be tied to the acquisition target's subsequent performance or retention of key talent, among other possible conditions.
That will be followed by another $50 million payout at a later time. $600 million and countingīloomberg reports that the purchase price is 180 million euros, or nearly $200 million, up front.
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