Spotify is making yet another big-budget purchase aimed at getting a lead in the growing podcast industry: The streaming music company has agreed to a deal to purchase The Ringer, the podcast-centric media company run and owned by Bill Simmons.
Spotify intends to hire Simmons and all of his approximately 90 employees. Most of those employees work on The Ringer’s 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’s ability to create podcasts, including his Bill Simmons Podcast, and some 30 other titles, which range from an NBA chat show to one devoted to rewatching old movies.
The companies didn’t disclose a sale price; the deal is supposed to close in the first quarter of 2020.
“With the Ringer, we’re basically getting the new ESPN,” Spotify CEO Daniel Ek told Recode in an interview after the deal was announced. “What [Simmons] has accomplished in just a few short years, it’s nothing short of extraordinary. ... It’s not just his own podcast, but his whole network that’s doing really well. He’s a talent magnet.”
Spotify hasn’t spelled out what it intends to do with The Ringer’s catalog of existing podcasts and content, but it would be surprising if it made them exclusive to the streaming platform. When it purchased Gimlet Media last year, it kept that podcast company’s stuff available on all platforms.
Here’s Simmons’s only commentary so far:
This morning we announced that @spotify is acquiring The Ringer. Couldn’t be more excited to work with @eldsjal and his phenomenal team.— Bill Simmons (@BillSimmons) February 5, 2020
More details to come down the road... but @ringer will remain @ringer in every respect. They appreciate what we do and they want us to be us.
This is the fourth podcast company acquisition Spotify has made in the last 12 months; last year it spent about $400 million to buy Gimlet Media, Anchor FM, and Parcast. Spotify executives have argued that adding a podcast business to its core music service will help them bring in new users, and keep existing users around longer.
The company is also building up a podcast advertising business, which promises to target listeners based on their demographics and online behavior. In its fourth quarter earnings statement released Wednesday morning, Spotify said it was seeing “exponential growth” in podcast consumption on its platform.
Ek said adding The Ringer would help boost his company’s appeal to sports fans, which he described as “super engaged and super loyal. It’s a strong currency to have.” And he said Spotify would continue to buy podcasting companies if it thinks they can grow faster inside of Spotify. “When you get a chance for a property like The Ringer, and you see the fits, and what Bill wants to do, it just made a ton of sense. If there are other deals of that caliber we would consider it.”
Spotify wouldn’t say how long Simmons intended to work for his new employer, but Ek said he believed Simmons would stick around so he could continue to build the company he founded five years ago. “I wouldn’t have done the deal if I didn’t feel that Bill was in it for the right reasons, and didn’t want to build something much bigger.”
“Our incentives are really aligned,” added Paul Vogel, Spotify’s chief financial officer.
Podcasting is growing fast, but it is still a niche business compared to the rest of the ad world. Last year, Edison Research estimated that 32 percent of people in the US over age 12 — that’s 90 million people — listened to a podcast each month. That’s up from 11 percent a decade ago.
But advertisers usually take a while to follow users. Podcasting advertising is supposed to generate more than $860 million this year and $1 billion in 2021. But the rest of digital advertising brings in more than $107 billion in the US.
Until now, Apple has dominated podcasting, primarily because of the popularity of its iOS operating system, which features a built-in podcasting app. But Apple hasn’t tried to make money from podcasts itself, and it doesn’t take a cut of the advertisements that listeners hear when they play podcasts on Apple’s devices and apps.
While Apple has expressed interest in funding some exclusive podcasts that would serve as marketing for its Apple TV+ service, Apple executives say the company is unlikely to compete in today’s version of the podcast industry. That’s because most podcasts are free and dependent on advertising, and Apple has staked out a pro-privacy position that makes it difficult to compete in ad-supported industries.
Simmons made his name as an online columnist at Disney-owned ESPN, which eventually gave him the resources to launch Grantland, a Ringer-like site that also provided a home for his podcasts. But ESPN bounced him out of his job in 2015 — a move Simmons has said stems from his criticism of Roger Goodell, the head of the National Football League and an important Disney partner.
Simmons then started The Ringer with backing from WarnerMedia’s HBO, which also hired him to create a short-lived TV show he hosted, along with other programming. Simmons has never disclosed if he has other investors; a person familiar with HBO’s initial investment says the company put in less than $10 million. Last year, Simmons talked to WarnerMedia’s Turner unit about selling his company to that business, according to people familiar with the discussions.
By buying The Ringer, Spotify is now in the web publishing business for the first time. (Vox Media, which owns Recode, has a commercial relationship with The Ringer.) While podcasts have driven The Ringer’s business, Ek said the site’s writers and videomakers were an important part of the company. “What’s really interesting with the website and the audio is that he’s really tried to play them off of each other.”
The Spotify/Ringer deal comes a week after Barstool Sports, another sports and pop culture publisher, was acquired by casino operator Penn National Gaming in a deal that values Barstool at $450 million. Like The Ringer, Barstool also has a significant podcast business, which it says generates around $30 million a year; Penn National intends to use Barstool’s name and appeal to rebrand several of its casinos and to launch an online sports betting business.