Brian McCullough: [00:00:13] Can we be recording now, because I want — let’s start there.
Nick Quah: [00:00:17] Well go right ahead. I’ll tell you — this is my setup right now. I have a beer open and I’m chewing on a bun.
Brian McCullough: [00:00:25] [Laughs] So I take it the last, I don’t know, 72 hours have been a little crazy for you?
Nick Quah: [00:00:29] Yeah it’s not great. [Laughs]
Brian McCullough: [00:00:31] All right well then let’s start with the most recent news. By the way, full disclosure, Anchor is our web host — our podcast host. So where did this Anchor deal come from?
Nick Quah: [00:00:53] Well I can’t speak to the tick-tock of what exactly — how the band did dealmaking — but on the face of it, Spotify acquiring Anchor makes a ton of sense. We do know that Spotify would benefit from a back end that would work for podcasting for its interests and adventures in podcasting. And we also know that Spotify has some interests around figuring out the advertising and monetization side of whatever podcast space they’re gonna get into. And so by acquiring Anchor they get two pieces there, right? They get the hosting aspect and they get Anchor’s recently-launched Anchor Sponsorships advertising, which is an in-platform advertising marketplace. It was their attempt to figure out how to help the shows that are hosted on their platform be able to find advertisers and make money. So essentially it’s a marketplace.
Brian McCullough: [00:01:41] And again I have direct knowledge of this. It’s super nascent. I think they’ve had —
Nick Quah: [00:01:47] It’s super new, yeah.
Brian McCullough: [00:01:47] — I think they’ve had less than five ads in the system so far. So it’s not like this is some sort of AdSense for podcasting that has been around for six [months] or even a year and made a ton of money. This is super early days for for their marketplace.
Nick Quah: [00:02:03] Right, absolutely. My understanding is that they could try to jerry-rig whatever hosting solutions they have that they use for music on their end, or they could acquire something that was built specifically for this community and this sort of creative asset class. And my understanding is that they won’t actually need the advertiser base that’s on the Anchor Sponsorship marketplace because they have their own brand relationships, they have whatever is coming in with Gimlet. What they need are the pipes. Some sort of structural pathway forward to make this work. And so I think that that was the thinking behind the Anchor acquisition. Of course it’s all — it’s barely been a couple of hours as we’re talking, I’m still trying to dig through the details of this. Including the price, which I still don’t know and I’m hearing a wide range of gossip right now. But on the face of it, the Anchor acquisition makes perfect sense within the context of what Spotify is wanting to do. The Gimlet thing is a little bit more surprising. Specifically because of the price that they paid, which is, as I reported, $230 million.
Brian McCullough: [00:03:06] You were able to confirm that?
Nick Quah: [00:03:10] This is before the deal closed. So I published that on Friday and it closed a couple of hours ago and so the price might have changed before that, but that was a number that I could report that was floating around.
Brian McCullough: [00:03:25] I live here in Brooklyn, you know, center of the podcast universe. Friends of mine in the podcasting industry are super super shocked at that price tag over 200 million dollars. Are you surprised by that?
Nick Quah: [00:03:39] I’m very, very surprised. To put this in context. The closest comparable deal was last fall’s acquisition by iHeartMedia of Stuff Media which is the publisher of such fine programs as How Stuff Works, Stuff Your Moms Knows, Stuff You Should Know, et cetera, et cetera, et cetera. And that company, Stuff Media, publishes about the same number of original shows and has a staff size about half of Gimlet’s. Gimlet has 120 employees, Stuff Media has 50, and that acquisition went for 55 million. And so it’s quite a jump to go from 55 to 230 which raises the question of what exactly is Spotify acquiring here? Or is this just their way of being really really excited and wanting to make a big statement about their foray into podcasting? Or if they’re seeing something else that we’re not quite sure of on the outside.
Brian McCullough: [00:04:31] Well what’s your theory on that then?
Nick Quah: [00:04:35] My gut feeling is that… So on the one hand, you have a couple different things. You have the fact that Gimlet is a particularly buzzy brand and you have a really really willing buyer on the part of Spotify which is flush with cash and is in a position to pour the kinds of money into the space that that podcasting simply has not seen before — as podcasting is a small village, it’s not used to wealth. And my my big theory revolves also around Gimlet Creative which is Gimlet’s branded podcast division. It’s essentially their team that produces both advertising, like in-episode advertising — the sort of experiential stuff to promote, I don’t know, Ford, MasterCard, whatever — Casper mattresses — companies that advertise on podcasts. And they also create a number of branded shows. My feeling is that some of that team will inform whatever advertising experiences will go throughout Spotify podcasts in general or podcasts on Spotify in general.
Brian McCullough: [00:05:34] So. Right. Actually we’ll get to Spotify in a second but would the theory be that that there would still be ads on podcasts on the Spotify platform?
Nick Quah: [00:05:46] Yes. I would imagine that would be the case. And that on top of the fact that Spotify would practice some form of exclusivity around the shows from Gimlet that they have acquired.
Brian McCullough: [00:05:57] What’s your tinfoil hat theory?
Nick Quah: [00:06:04] My tinfoil hat theory, yeah [chuckles], is the fact that Gimlet Creative accounts for a significant proportion of the difference in value. Why it’s significantly more than 55. My tinfoil hat theory is that they bring something to the table that Stuff Media couldn’t. And Spotify values the branded podcast stuff quite a bit — or the possibilities of it, anyway.
Brian McCullough: [00:06:26] And because Gimlet already has relationships with people like Ford and beyond even the universe of Caspers.
Nick Quah: [00:06:34] Right, right, right. And Gimlet is a very very buzzy podcast company. Perhaps the buzziest. The press loves them. They have inroads into Hollywood at this point in time. It’s just sort of a sexy company in a bunch of different ways. The big question is, is it 230 million dollars sexy? And I don’t know. You know, I’m not a corporate development person so I really don’t know much about this world.
Brian McCullough: [00:06:56] All right, well then let’s look at the Spotify angle here. So a smart person was telling me over the weekend — and I think you’ve talked about this too — that it doesn’t matter if you’re one of these companies that is making that sweet sweet recurring revenue from subscriptions, it’s all about people’s time. So should we be thinking of this as: Spotify understands that and that it doesn’t matter if it’s audio, video, or whatever, as long as they have your time — that’s the thing that they want to grow and monetize and turn into a huge platform.
Nick Quah: [00:07:32] Yes, absolutely. I believe the CEO Daniel Ek explicitly said that in an interview a couple of hours ago in which the point is about their push into podcasting. A unit of podcast is able to drive more time spent on the platform than a unit song —
Brian McCullough: [00:07:49] Actually, can you underline that? Because I was surprised by that. You’re saying that they’re seeing that people that listen to podcasts on their platform actually they can convert those into paying subscribers and that those people end up listening to more music as well.
Nick Quah: [00:08:05] No. I don’t think they’ve outlined that specifically. But I think the theory is that, A: People who listen podcasts tend to be really really engaged audiences in general. That’s one of the fundamental tenets of this medium and that’s been its narrative for the longest time. And B: It’s very straightforward. A podcast generally goes for longer than a song. A song goes for three minutes, five minutes, very rarely does go to 10 [or] 20. But podcast episodes average 20 [minutes] to an hour. And so a unit podcast keeps a person on the platform longer than a unit song.
Brian McCullough: [00:08:45] Well and then there is the obvious Netflix analogy where with music, Spotify has to play ball and give a ton of money to the record companies, but potentially with podcasts there is less of that and then there’s the whole Netflix concept of you would have your own library of content in-house.
Nick Quah: [00:09:05] Right. Again, interestingly enough, Spotify’s CFO — I forget his name — but he is the former CFO of Netflix. And he explicitly mentions that they’re shadowing or mirroring that strategy in the early goings for this podcast thing.
Brian McCullough: [00:09:27] Again looking at Spotify specifically from a larger lens, I think I read you say once that you wouldn’t be surprised if Spotify also evolves into video and other mediums as well — not just audio. You wouldn’t be surprised if a few years from now, Spotify would launch its own, say, streaming video series or something.
Nick Quah: [00:09:50] Actually they’ve already experimented with that. So a couple of years ago they rolled out something called Spotlight which is their take on original video content. First of all, I think video is just incredibly difficult at this point in time especially. On the one hand you have YouTube basically commanding the majority of the universe when it comes to shorter form or user-uploaded video content. And then you have whatever war is going on between Apple, again Netflix, and Amazon, with the longer form feature presentation programming. And so my sense is that they tried video. Didn’t work out. And now they’re trying podcasts and or also, you could broadly think about it as “talk radio” or “talk audio” content more broadly.
Brian McCullough: [00:10:39] So I’ve heard some talk that there are other players that have been sniffing around as well. And again the analogy to streaming video where Disney is going to have its streaming video, Universal’s going to have its streaming video. Have you heard any talk of other players sniffing around podcasting companies at the moment?
Nick Quah: [00:10:59] So you’re saying, will we see other acquisitions not by Spotify but by other podcast companies?
Brian McCullough: [00:11:04] Right. I guess maybe Apple, seeing as how they’re the sleeping giant forever in this space, potentially they might? I don’t know. I don’t want to put words in your mouth, but have you heard other players sniffing around this?
[00:11:19] Obviously I can’t speak on behalf of Apple or any of these companies. And again I’ve heard rumors flying in all directions. Then again I also heard rumors that the Earth is flat, you know? But that’s just been…not true. I cannot verify any of the rumors I’ve been hearing. But the theory is that with Spotify making such a big loud leap into podcasting, my guess is it’ll shock some sort of arms race. You’ve got Spotify locked in heated battle with a bunch of different other platforms including Pandora, which itself has its own podcast player going. They just released something called the Podcast Genome Project a couple of months ago. And I wouldn’t be surprised if Apple changes or shifts its position somewhat as a result if it ends up caring. Again, it really depends on how they view their focus in the services department right now. But we’re also talking about companies that aren’t platforms. So we’re also talking about like how will Conde Nast react to something like this, how will other media companies react to this? This is a signal that this is the pie worth eating, and FOMO is a really strong driver even if it’s not obvious that it’s FOMO.
Brian McCullough: [00:12:32] All right, final question and again this is zooming out to the big picture. You talked about this in your most recent emails. But what do you think this says about podcasting as an industry? This is clearly some sort of a seminal moment. Just, I’d be curious your big picture take on where this puts podcasting right now.
Nick Quah: [00:12:58] I mentioned in my newsletter, in very melodramatic terms — because I’m a melodramatic person — this is not a turning point, but it’s an end of an era. We have been living through quite an interesting couple of years. I would argue that this specific era started with 2014, when you had this confluence of events: you had Serial exploding, and you also had the fact that Apple had bundled the Podcasts app by default with the latest iOS version that year, and it was this chain reaction that drew a significant amount of attention to an industry, to how it had been growing steadily year over year. It just kind of supercharged it in a bunch of different ways. And throughout this past couple of years, there was this sense that there were many different competing visions that stood a chance to win. We have communities that still believe in podcasting as the frontier for open publishing. And we have communities that see it as a space to build new empires. And with this big acquisition that brings in money — the kind of money that we’ve never actually seen before — it raises the stakes to a whole new level. I don’t know what comes next. It’s gonna be incredibly messy. People are gonna get upset. But it’s also generally — it’s just generally a change, and it’s both good and bad, and I think people are just going to have to move really quickly to figure out how they fit into this new landscape.
Brian McCullough: [00:14:26] I lied. Real quick, two more questions. … I’ve heard for years now people talking about, well, somebody is gonna build a Netflix for podcasting. The idea being, it’s subscription, it’s paywalled, that sort of thing. Do you think that this is a play in that direction? Or do you expect Spotify to go in the ad-supported and still “anyone can listen” direction?
Nick Quah: [00:14:54] I… [Chuckles] Obviously, I don’t know.
Brian McCullough: [00:14:57] Right, right, right.
Nick Quah: [00:14:59] I’ll say a couple things. One, we will see a clearer, a purer sort of Netflix for podcasting play come out soon. There’s this company called Luminary Media that raised 30 million dollars plus-plus at the beginning of 2018. [They want] to test out that theory of whether you could create a pure paid podcast platform. And we’ll see that model get tested out. And we don’t really know how this Spotify thing is going to shake out. It’s a big swing. Again, it comes out to execution. We have to really see whether they’re able to drive its users to podcasts and whether it’s able to create podcasts that you want to listen to, or they’re able to surface a wider universe of podcasting to an audience that’s never heard it before. Or heard podcasting before. And so we are at the beginning of a lot of different movements and the idea is always that the opportunity is always there for a paid podcasting platform. The opportunity has always been there there for Google Podcasts to actually make Android users finally listen to podcasts. But all of this comes out to execution. And we’ll really have to see who plays with with who, and and who implements the better feature, it really really comes down to to a battle of attrition at this point.
Brian McCullough: [00:16:13] Then the final thing I want to say — I want to amplify something that you said in your newsletter: Alex Blumberg, you owe us a new episode of Startup that talks about this entire process. Obviously you can’t. You’ve got to wait for the dust to settle, and hopefully Spotify is on board with it too. But, man, I need that Startup episode talking about this whole process.
Nick Quah: [00:16:36] You know, what I also find additionally interesting is, I was relistening to the first season of Startup over the weekend and it’s a completely different show now. And I personally, as a person who also reviews or writes podcast criticism for New York Magazine… I’m curious as to how Alex Blumberg is ever gonna make another show again. Or make another episode again. He is not the same person. His power has been in his relatability. It’s incredibly difficult to relate to a multimillionaire. And so I’m curious to see what his next artistic face looks like.
Brian McCullough: [00:17:08] Yeah but, the story there is: What does it feel like to become a multi-millionaire? Anyway. Nick, thank you so much for taking time out on the drop of a hat to talk about this and enjoy your so-called vacation, right?
Nick Quah: [00:17:21] Yeah, you know, fuck everybody, I just want to be on the beach! [Laughter] I’m stuck here right now!
Brian McCullough: [00:17:27] Nick asks for no more news.