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Music-streaming app Spotify transcends tunes with purchase of 2 podcast firms

It becomes the latest player to invest in a medium that is becoming increasingly popular

New York City

WHEN Spotify began more than 10 years ago, it had a simple goal - to establish itself as a force in the music business by making millions of songs instantly available to listeners worldwide.

But with its announcement on Wednesday that it had acquired two podcast companies, the streaming service sent a strong signal that it has broader ambitions.

The company's CEO, Daniel Ek, emphasised the shift in direction in a blog post on Wednesday. "I'm proud of what we've accomplished, but what I didn't know when we launched to consumers in 2008 was that audio - not just music - would be the future of Spotify," he wrote.

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In announcing its fourth-quarter earnings, the Stockholm company said it had acquired Gimlet Media, the studio behind the popular podcasts "Crimetown", "Reply All" and "StartUp", and Anchor, which makes tools for recording and distributing podcasts. Financial terms of the transactions were not disclosed.

With the acquisitions, Spotify becomes the latest player to invest in a medium once considered a low-stakes sandbox in the larger media environment. Now that podcasts have become part of the listening routine for millions of people, major companies have recognised them as an important - but still relatively cheap - source of content.

"Strategically, if they can get their users to listen to podcasts in place of music, it improves their margins," Owen Grover, chief executive of Pocket Casts, a podcast app, said of Spotify.

While podcasts are hardly new - they became part of Apple's iTunes in 2005 - their popularity has surged in recent years. By some estimates, more than 600,000 podcasts are available through Apple.

Spotify, which went public in April, announced Wednesday that it ended 2018 with 207 million active users around the world, 96 million of whom paid for monthly subscriptions. Its revenue for the year was 5.3 billion euros (S$8.2 billion), an increase of 29 per cent from 2017.

And while in 2018 the company lost 78 million euros, it had a net income of 442 million euros in its fourth quarter. Spotify's gross profit margin also grew in that quarter to 26.7 per cent from 25.3 per cent in the previous three months. NYTIMES