Spotify’s spending spree to carve out a place in the podcast industry isn’t any secret. But the company has so far been reluctant to reveal just how much it paid each of the companies it has absorbed this year. Spotify said it was because the company was talking to other potential targets and the information would undermine that deal-making. But as a public company there’s only so long such things can be kept from shareholders. And now just-filed documents with the Securities and Exchange Commission give a specific accounting of what Spotify has spent on Gimlet Media, Anchor FM and Parcast.
Gimlet Media so far is the big-ticket purchase. Spotify tells stock owners it paid $190.7 million (or €172 million) to acquire the podcast production company in February. The deal was nearly all-cash with just over $2 million of Spotify stock also part of the package. The SEC filing also shows just how expensive buyouts can be just to execute. Spotify reports it spent about $3.3 million (€3 million) in acquisition-related expenses.
Anchor FM was Spotify’s second-largest deal, announced in February alongside the news of the Gimlet buyout. The SEC filing shows Spotify paid about $150.8 million (€136 million) to acquire the software company that podcasters use to create and distribute their shows. Unlike the Gimlet deal, Anchor’s owners didn’t directly get any Spotify stock as payment. But it will give executives Spotify stock indirectly since the terms paying them $12 million instead of a cash paycheck. The filing also notes that it took more than $1 million in acquisition-related expenses to get the Anchor FM deal done.
The last big acquisition announced by Spotify came in April when it bought Parcast, a podcast production company that Spotify said would help bolster its portfolio by adding a team of writers, producers, and researchers. For that it paid about $54 million (€49 million) although that figure could eventually be much higher. That’s because in addition to the roughly $39.9 million in cash, Parcast also received $14.4 million in “contingent consideration” tied to the release of several podcasts already in the works. Depending on whether those shows hit certain user engagement targets, that payout could approach $48 million.
Spotify in its quarterly letter to shareholders this week reported second quarter revenue grew 31% compared to a year ago, but the three new companies weren’t a factor. The SEC filing tells stock owners that the “revenues and operating losses of Anchor, Gimlet, and Parcast were not significant individually or in the aggregate” for Spotify in the first half of the year.
Spotify this week also announced it had signed new multiyear licensing deals with two of the big four record companies. “We're in active discussions with the other two,” CEO Daniel Ek said on a conference call with analysts on Wednesday. But while he didn’t offer any financial clues then, the filing with the SEC offers a glimpse of how much Spotify is paying to use music.
The deals signed with the two undisclosed record companies include minimum guarantee commitments of about $942 million for royalty payments over the next two years. Ek said the primary focus of the company’s sixth round of label negotiations in its 13-year history has been on enabling its strategy of helping artists use the platform to promote their music. “Our development of the strategy is well underway, including testing and prototyping products with a few key partners,” Ek said.