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Spotify Expands Podcast Business With Deal To Buy The Ringer

Spotify hopes acquiring The Ringer will help boost its presence in the podcasting marketGETTY IMAGES

Spotify has "agreed to a deal to purchase The Ringer," making yet another "big budget purchase aimed at getting a lead in the growing podcast industry," according to Peter Kafka of RECODE. Spotify "intends to hire" Bill Simmons and "all of his approximately 90 employees." Most of those employees "work on The Ringers' website, which covers sports and culture, and Spotify intends to keep the site up and running." But what Spotify "really wants out of the deal is Simmons' ability to create podcasts, including his Bill Simmons Podcast, and some 30 other titles." The companies "didn't disclose a sale price; the deal is supposed to close" sometime in Q1. Spotify "hasn't spelled out what it intends to do with The Ringer's catalog of existing podcasts and content," and it "wouldn't say how long Simmons intended to work for his new employer." But Spotify Founder & CEO Daniel Ek said that he "believed Simmons would stick around so he could continue to build the company he founded five years ago." Ek: "I wouldn't have done the deal if I didn't feel that Bill was in it for the right reasons" (VOX.com, 2/5). Simmons tweeted The Ringer "will remain @ringer in every respect." Simmons: "They appreciate what we do and they want us to be us" (TWITTER.com, 2/5). The HOLLYWOOD REPORTER's Natalie Jarvey notes Spotify "sees podcasts as a way to expand beyond its music roots." The company spent around $400M to "acquire three podcast companies last year" (HOLLYWOODREPORTER.com, 2/5). Author and financial advisor Ben Carlson tweeted, "ESPN seriously dropped the ball on podcasts & should have owned this market" (TWITTER.com, 2/5).

UPS & DOWNS: The WALL STREET JOURNAL's Anne Steele notes Spotify "posted better-than-expected growth in users and said its investment in podcasts is helping convert people who use its free tier into paying subscribers." At the end of Q4, Spotify had 271 million "monthly active users, topping the company's expectations." The company also had 124 million "paying subscribers." Average revenue per user for the paid-subscription business "fell 5%, or 6% excluding foreign-exchange-rate effects," to $5.14, "mostly due to an extended free trial period in the quarter, but also owing to new subscribers coming in via discounted plans through family and student accounts, and lower pricing power in international markets." Spotify "swung a loss" of $229.1M for the period as it "invested in podcasts and other parts of its business" (WALL STREET JOURNAL, 2/5).

INVESTING IN THE FUTURE: CNBC's Jim Cramer said Spotify is "doing well, but not well enough." Cramer: "No one ever seems to think it's doing well enough." Cramer said the acquisition of The Ringer "was smart, but every time they make an acquisition it doesn't do anything." CNBC's David Faber said Spotify has "focused a lot on podcasts" and he would "love to know what they are actually paying for (the) Ringer just given how (Simmons) spent so much time building that company, the kind of failed partnership with HBO that he had for a while there." Cramer: "They're using a bit of an Amazon model, 'We're just going to keep expanding, doing what's right long-term,' and the market isn't used to hearing long-term. They want to have short-term, but short-term doesn't mean much to Spotify because it's run very much like a private company" ("Squawk on the Street," CNBC, 2/5).

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