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Insider: February 13, 2020

Numbers. Okay! So, the latest Spotify SEC filing is out, which means we have numbers for the company’s acquisition of The Ringer. Here’s the line: “Subsequent to year-end, the Group entered into an agreement to acquire Bill Simmons Media Group, LLC. for cash consideration totaling approximately €130 to €180 million, a portion of which is deferred, subject to closing adjustments.” At today’s exchange rate, that’s $130 to $195 million in cash, i.e. guaranteed money.

Add to this an earlier report from Bloomberg News that the sum was to be $250 million, and you have what will likely be the additional amount to be earned based on performance achievements and contingencies, stuff like that.

The Variety report on this filing neatly threads together all of Spotify’s acquisitions in cash and contingencies in one nice paragraph:

In 2019, Spotify acquired three podcast companies — Gimlet Media, Anchor and Parcast — paying some $393 million for them, with additional payment incentives over four years contingent on employment, according to regulatory filings. The Gimlet deal was worth about $189 million (€172 million) plus up to $44 million in incentives; Anchor was $150 million (€136 million) plus $22 million in incentives; and Parcast was $54 million (€49 million) plus up to $11 million in incentives.

Looks like I gotta adjust that spreadsheet; I got the Anchor number off by quite a bit. [Update: the Parcast number is a little off, based on the 6K filing — incentives can be up to an additional $47 million over the next three years.]

Anyway, in case your mind is heading in the direction: yes, The Ringer’s deal appears to be worth more than Gimlet’s. Setting aside the lunacy of these numbers in general, that thinking broadly makes sense to me. Pushing past the opaque metric of download numbers, The Ringer has generally outperformed Gimlet, at least on an eye-test level, in a bunch of ways at time of sale. They have a deeper track record of creating hit shows, they have a more robust internal system of launching new shows (that isn’t super dependent on PR pushes), and they specialize in a kind of podcasting that’s typically more cost-effective (talk vs. narrative). Additionally, Ringer founder Bill Simmons previously told the Wall Street Journal that the company was profitable.

What’s the big picture takeaway here? Based on your messages so far, there’s a thick tension between (a) the viewpoint that this is yet another mark of crucial validation for podcasting as various operators go about their days fighting their battles to convince advertisers, agencies, and so on to give money for the shows they’re making, and (b) the viewpoint that is yet another major step towards deleterious consolidation in an emerging space.

On that latter note, more than a few readers drew attention to this Substack post by Matt Stoler, whose newsletter BIG specializes in the politics of monopoly. In it, Stoler makes an extensive argument against Spotify’s continuing spendy investments in the space, drawing a direct line between those efforts, the company’s ambitions with streaming ad insertion (and its implications for data and privacy), and the power that Google and Facebook currently exerts over digital advertising more broadly. In other words, he sees the closing of the podcast world and the establishment of a strong direct gatekeeper.

Here’s the most important chunk:

It’s not 100% clear how well this will work. Podcast ads are, like radio ads, often based on the trust of the host of the show. Hosts tend to read out ads, so they are more like paid sponsorships relying on the trust and voice of the host than traditional advertisements. But if the Spotify ad insertion tech is sophisticated and effective enough, they may be able to alter this dynamic, making any particular ad slot on any podcast less valuable.

No advertiser will care if you’re a listener of Joe Rogan or Bill Simmons, only that you are a 34 year old male with a certain income reachable in thirty forty different audio slots, which can then all go in an auction. Or even if they do care, competitive ad networks who offer the service you want will probably die… the actual podcast becomes commodified, because all that matters is the listener data combined with the ad slots, not the show against which those ad slots are sold. This is another complicated way of saying the people who do the work of making and distributing a show don’t get the benefit from the work they do.

What happens in this scenario is that a few giants, not just Spotify, ultimately become dominant vertically integrated podcast, distribution and advertising platforms. These will then cut deals with each other, and cartelize the industry into a land of giants, much as Disney is doing in Hollywood.

Responding to this potential future, Stoler argues for the FTC to intervene, and for podcasters — indie and otherwise — to organize.

I’m still thinking through the argument, and long-time readers can probably guess that I share the anxiety. A few readers noted that the key condition to watch comes from this line: “if the Spotify ad insertion tech is sophisticated and effective enough.” But I don’t know. I’m not even sure it has to be that sophisticated.

Meanwhile, The Ringer just announced a new audio project exclusive to Spotify.

Side note. Another reader dropped this historical factoid in my head: back in 2008, Audible sold to Amazon for $300 million. It’s a little pointless to play the alternate history game — the universe, alas, is built on infinite variables — but I do wonder what Audible would’ve gone for if it sold in this present environment. And before you argue about separate markets, don’t forget: I argued last summer that audiobooks are not exempt from whatever’s happening with Spotify.

Meanwhile, iHeartMedia is trying to insert itself into the podcast advertising competition, announcing its own podcast ad suite during yesterday’s Podfront event in Los Angeles.

Poppin’ IPs… Three stories on the pod-to-Hollywood pipeline:

  • From Deadline: “Cynthia Erivo to Star in Film Adaptation of Her Podcast ‘Carrier.’” Pair with this column from November.

  • Also from Deadline: “Spotify & HBO Max In Final Talks To Adapt Family Podcast Series ‘The Two Princes’ Into Animated Special.” Between this and the upcoming Quibi show built around The Nod, it seems that the streaming wars are very kind to Gimlet’s adaptation efforts.

  • Meanwhile, from Variety: Conde Nast Entertainment is “launching studios initially for five magazine titles: The New Yorker, Vogue, Vanity Fair, Wired and GQ. With the move, CNE plans to hire a studio head at each title who will work alongside the editorial teams — with the goal of better identifying and developing projects for film, TV and podcasts.” Gone are the drug-filled days of prestige magazines, here are the Goop-filled days of… Los Angeles, I guess. Anyway, shout-out to Vox Media’s acquisition of Epic Magazine.

Speaking of Vox Media… as telegraphed in that recent Digiday piece, Vox Media is beginning to apply its audio ambitions to a few New York Media brands. Good One, Jesse David Fox’s “Song Exploder meets Comedy” pod, is now officially part of Vox Media Podcast Network, and will soon relaunch on a weekly schedule.

The Internationale. Two stories from earlier this week that go together, I guess:

  • Megaphone is expanding its hosting and ad-insertion platform business to Europe. According to the press release, the company’s new European base will be based in Germany.

  • Luminary is expanding the number of non-American markets where it will be available, adding New Zealand, South Africa, and Ireland to the mix, according to Axios. It’s already available in Australia, Canada, and the UK. Sure! For what it’s worth, we still have very little idea how it’s doing in the US and any of its existing markets, whether it’s paid subscriptions, time spent listening, app downloads, and so on. But sure. There’s a new season of Fiasco out, at least.

From Digiday: “A ton of money is pouring into podcasting as platform companies and advertisers express more interest in the medium. But for the smaller publishers that have been experimenting with the medium, the increased competition for listeners — and, by extension, advertising dollars — is prompting them to change their approaches.”

Those smaller publishers cited in the piece, it seems, include: Politico, Business Insider, and Bustle… which, I don’t know, don’t strike me as very small at all?

While the story is ostensibly framed as one about a slowing “podcasting gold rush,” it’s really about focus and resource allocation: nothing is fuckin’ plug-and-play, and if you’re a media company, you can’t be good at everything, and you can’t expect to be good at anything that you’re not really allocating adequate resources to develop. Come on.Meanwhile… Here’s TechCrunch: “Headspace… has just closed on $93 million in new equity and debt financing from a slew of investors as it pursues a number of clinical studies that could provide scientific validation for the somewhat nebulous claims around the benefits associated with mindfulness and meditation.” The new financing, I get, given the competition with Calm. The scientific validation stuff…. oof.Stacks. SiriusXM is acquiring a $75 million minority stake in Soundcloud, according to the Hollywood Reporter. Why this is interesting: SiriusXM owns Pandora, and its parent company is Liberty Media, which also owns LiveNation. Quite a stack you’ve got there.