What's going on?
Audio streaming service Spotify on Wednesday announced it was buying two major podcast companies: Gimlet Media and Anchor.
What does this mean?
Spotify thinks that over 20% of what’s streamed on its platform will eventually be non-music, and so it’s splashing the cash now to ramp up its original content – à la Netflix. Spotify’s investors will hope that this beefs it up compared to other surging streamers, particularly Apple Music.
Some reports suggest Spotify paid more than $200 million for its new toys, but the company’s keeping quiet. However much it’s paying, Spotify can choose to pay in cold, hard cash, or instead offer an equivalent sum in its stock – an option made easier by being a public company. A share of Spotify’s currently worth around $130, and the company might prefer handing over a bunch of these to dipping into its (relatively) skinny $1 billion bank balance.
Why should I care?
For markets: A reprieve for media stocks.
While Spotify’s stock fell 5% on Wednesday – likely reflecting investors’ typical fretting over whether an acquisition successfully works out and helps grow profits – the company’s new groove could coincide with renewed investor interest in media stocks (tweet this). While several new(ish) media companies are downsizing, Snapchat owner Snap Inc. reported narrower-than-expected losses late on Tuesday that sent its stock up 26% on Wednesday. Meanwhile, old-timers Disney and the New York Times’ surprisingly strong broadcasting and subscriber growth led investors to buy up their shares on Wednesday, too.
Zooming out: Slack is typing…
Earlier this week, workplace messaging tool Slack – a decade-old startup perhaps best known for its use among other startups – filed paperwork for a 2019 stock market listing. It’s likely to follow the approach Spotify took back in April 2018 – largely shunning investment banks’ assistance in favor of a “direct listing”. That’ll save it money on fees, but risks big swings in its stock price. Such volatility could make using its own stock for any future acquisitions challenging.