Issue Extra,  published February 5, 2020

Spotify to officially acquire The Ringer

“With The Ringer, we’re basically getting the new ESPN,” said Spotify CEO Daniel Ek during the earnings call this morning, shortly after the company sent out word that it had officially acquired The Ringer, the distinctly podcast-heavy digital media company founded by former ESPN personality Bill Simmons.

It’s something of a cheeky statement, given the tumultuous circumstances that led Simmons to exit ESPN in 2015, but it’s also an indication of the specific opportunity governing the thinking behind the acquisition: in addition to picking up Simmons, one of the more concretely valuable talents in the podcast space, along with a prolific podcast operation that’s already capable of generating considerable revenue off the bat ($15 million was the number cited in a Wall Street Journal report from early 2019), Spotify is getting a vessel that would help it establish a strong presence in the Sports category — a media genre that’s incredibly valuable.

More on that in a bit, but first, some detail. News of a potential acquisition officially hit the transom a few weeks ago, on January 17, with the Wall Street Journal picking up word of “early talks.” The official announcement went out this morning in time for Spotify’s earnings call. On Twitter, Recode’s Peter Kafka put out some additional detail around the talks: “Deal has been kicking around for months, moved into high gear in last few weeks. Teams negotiated through Super Bowl weekend, and did two overnight sessions; finalized after Spotify released its earnings this am.” It is expected to close by the end of the first quarter.

(Meanwhile, Spotify posted a largely good quarter — total monthly active users,  premium subscriber numbers, and total revenue are up — with positive gains on the podcast front. They claim to see “exponential growth” in podcast consumption, with more than 16% of its monthly active users engaging with podcast content and actual consumption hours growing nearly 200% year-over-year.)

The terms of the deal were not disclosed, nor the deal size. Two things on this: first, we’ll find out soon enough, given that Spotify is a publicly-traded company and would have to file the hard number at some point, and second, a probable reference point would be what were reportedly earlier talks between Simmons and AT&T’s WarnerMedia, where the proposed price was thought to be around $100 million. Again, here’s a report from the dude Peter Kafka with that detail.

However, we do know that the deal involves the entirety of The Ringer — that is, both its podcast operation and the broader digital media operation, which includes, among other things, a website and a YouTube-focused web video operation (protect NBA Desktop) — being brought into Spotify, with CEO Ek noting on the earnings call about the value that the audio and non-audio portions of The Ringer gives each other. This means that the Swedish streaming audio platform now owns a broader digital media operation, and it also means that all existing Ringer employees would have the opportunity to join Spotify.

At this point in time, no layoffs are expected, broadly consistent with what we saw from the Gimlet Media acquisition, which was announced this time last year.

Sticking to the labor front, there were some frustrations when word of the early talks hit the press last month. The Ringer’s workforce, which had unionized with WGA East, had issued a statement expressing dissatisfaction over having learned about the potential acquisition from news reports as opposed to management — a state of affairs that stretched out for weeks. This morning, the Ringer Union issued another statement in response to official sale (via WSJ’s Ben Mullin): “We anticipate a productive relationship with new management for all Ringer staff members… After weeks of public reports about a potential sale circulating without comment from our senior managers, we look forward to hearing from them about how this transaction will affect our day-to-day work.”

There will be questions over exclusivity. Firstly, in terms of Ringer podcasts now existing in platforms outside Spotify. For what it’s worth, I imagine there isn’t going to be much difference from what we already see now with the company — remember that The Ringer had already been experimenting with exclusive Spotify podcasts via The Hottest Take, though the bulk of their audio output lives everywhere — and also, based on what we’re still seeing with Gimlet Media, whose output hasn’t been completely dragged behind a Spotify wall. Besides, there’s a good amount of value to be had… for now… for these Spotify-owned podcast publishers to have their shows exist on other platforms, where they can more or less function as marketing assets (that can additionally generate ad revenue). At it stands, I don’t think there’s much incentive to go fully exclusive right now, but it does nonetheless seem like a strong card to hold onto in anticipation of, say, a bad growth year or some retaliatory action from competing platforms.

The second question of exclusivity pertains to Simmons as key talent in front of and behind the mic. No word on that, but much like the Alex Blumberg-Matt Lieber situation, I imagine there would some expectation that Simmons would be locked into Spotify for at least a few years.

Okay, back to the Sports thing. So, my original thinking about the value in this deal — as laid out in an earlier column — primarily revolves around seeing this as a Howard Stern-type situation, in which the idea is to bring in a blue chip property to immediately further increase the value of the platform in the eyes of potential audio consumers. That, of course, would require some amount of exclusivity, which in turn comes from a mind-set that sees the acquired asset as powerful enough to convert listeners that previously might’ve been comfortable doing the bulk of their consumption on other platforms.

But the emphasis in the earnings call that positions the acquisition as a means to drive a global sports strategy opens up that thinking by quite a lot. (The specific line: “With this acquisition, Spotify continues to deliver against its goal to become the world’s leading audio platform. We look forward to putting the full power of Spotify behind The Ringer as they drive our global sports strategy.”)

There is, as previously mentioned, quite a bit of value to be mined from the Sports category, which we’ve seen in depth across a wide spectrum of media (talk radio, television, websites, and so on), but still has significant ways to go in podcasting. We do have some established podcast operations working on the category — Barstool Sports and, yes, ESPN comes to mind — but the prospect of a sports podcast operation that’s combined with the distributive reach of a streaming audio platform, in particular one that’s globally-oriented from the start, feels unparalleled. All of which is to say, there’s a good deal of growing that can be done from here, and I don’t think we’ve quite seen the shape of what this can be just yet.

But The Ringer isn’t just a sports media company; it traffics in a good deal of other areas, notably pop culture. Between that, and the fact that Spotify hasn’t owned a somewhat sprawling digital media operation before, we should probably expect there to be a fair amount of strange in this acquisition, and subsequent integration. There’s a general goal direction that makes a ton of sense, but the details can get messy. And it’s the details that makes things work.

I run this thing.