Last week, Spotify announced a deal to acquire the sports and pop culture media company, The Ringer.
This deal does not come as much of a surprise as talks have been in place for several weeks; it was only a matter of time. Podcasting is a rapidly growing industry, and Spotify has been committed to investing in it over the past few years. The Ringer, founded by long-time sports writer and analyst Bill Simmons, features more than 30 podcasts, many of which are highly successful.
Podcasting can be very profitable given how low production costs are. According to the Interactive Advertising Bureau’s 2018 Podcast Ad Revenue Study, podcast advertising revenues in the US were expected to reach $678 million in 2019 and $1 Billion by 2021. The recording equipment and process is relatively cheap and does not require a large crew. This is monetized by selling advertisements which are read by the show’s hosts and just like any other type of media; the more people that tune in, the higher value those advertisement spots become.
Since there are podcasts being made about almost anything you can think of, the opportunities for streaming platforms like Spotify to expand its content are endless. Many podcasts are about specific topics, which gives companies the ability to market their product or service to their exact target audience.
Although the terms of the deal were undisclosed, Front Office Sports reported in January that Bill Simmons wanted $200 million for The Ringer.
What gives The Ringer this kind of value is their large and loyal fanbase that Spotify desired to further develop their podcasting library. Bill Simmons was a sports writer and analyst for ESPN for 14 years, which is what gave him an initial base audience when founding The Ringer and starting “The Bill Simmons Podcast,” their most successful show. Many people are familiar with his voice and already have an idea of his values. This makes consumers want to tune in over someone they’ve never heard or seen on TV.
By having content about sports and pop culture, they are exposing sports fans to pop culture content, and exposing pop culture fans to sports content. Having podcasts that vary so greatly in topics brings in a wider range of audience than, for example, ESPN’s podcasting network would.
Some of their biggest shows besides “The Bill Simmons Podcast” include “The Ringer NFL,” MLB and NBA shows, “The Ryen Russillo Podcast,” “Binge Mode,” which reviews media such as “Game of Thrones” and “Harry Potter,” and “The Rewatchables” that focuses on movies. This unique style has been proved to work as “The Ringer” has steadily grown its audience since launching in 2016, so much that Spotify’s CEO, Daniel Ek, felt the need to add them to the collection.
Ek said he feels Spotify has acquired “The New ESPN” and that he hopes the deal brings “highly loyal sports and culture fans to the platform.”
Spotify’s paid subscriptions revenue increased 24% in 2019, which was higher than they were expecting. They believe much of this was contributed by their efforts in expanding their podcast content. In 2019, their total number of podcasts on the platform grew to 700,000 and podcast listening hours grew 200%. They are consistently investing in new content, most notably in 2019 by purchasing the companies Gimlet Media, Anchor, and Parcast for a combined $393 million.
The Ringer will, without question, add value to Spotify and get people to regularly turn to the platform for a vast variety of entertainment. With their proactive approach to gaining content, Spotify has, for quite some time now, seen themselves as not just a “music platform” but an “audio platform.”
