Homework answers / question archive / Fast Company Anchor is Spotify’s best bet to beat Apple for control of your ears But will being part of Spotify put Anchor’s mission of “democratizing audio” in jeopardy? Anchor is Spotify’s best bet to beat Apple for control of your ears [Photo: courtesy of Anchor] BY KC IFEANYI “With more than 200 million users around the globe, Spotify is already one of the world’s most-used apps, but we see an opportunity apart from where we sit today

Fast Company Anchor is Spotify’s best bet to beat Apple for control of your ears But will being part of Spotify put Anchor’s mission of “democratizing audio” in jeopardy? Anchor is Spotify’s best bet to beat Apple for control of your ears [Photo: courtesy of Anchor] BY KC IFEANYI “With more than 200 million users around the globe, Spotify is already one of the world’s most-used apps, but we see an opportunity apart from where we sit today

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Fast Company Anchor is Spotify’s best bet to beat Apple for control of your ears But will being part of Spotify put Anchor’s mission of “democratizing audio” in jeopardy? Anchor is Spotify’s best bet to beat Apple for control of your ears [Photo: courtesy of Anchor] BY KC IFEANYI “With more than 200 million users around the globe, Spotify is already one of the world’s most-used apps, but we see an opportunity apart from where we sit today. An opportunity that will allow us to reach beyond music to engage users in entirely new ways,” wrote Daniel Ek, Spotify’s CEO and cofounder, back in February. “To really understand, take the current value of the video industry. Consumers spend roughly the same amount of time on video as they do on audio. Video is about a trillion dollar market. And the music and radio industry is worth around a hundred billion dollars. I always come back to the same question: Are our eyes really worth 10 times more than our ears?” Ek went on to announce his intent to redefine Spotify from being about music to focusing on audio, and he announced two acquisitions: Gimlet Media and Anchor. Gimlet, which has been a media darling since it launched with a podcast about its own startup story, received the bulk of the attention as reporters sought to nail down its $230 million acquisition price. As the creator of such podcasts as Homecoming and Reply All as well as StartUp, Gimlet represents Spotify’s desire for building a more robust catalog of exclusive originals with a proven hitmaker. Doubling down on that idea, Spotify also bought the scripted storytelling platform Parcast in March. But if Spotify is going to achieve Ek’s mission to make our ears as valuable as our eyes, the acquisition to watch is the one that’s received the least attention: Anchor. Since officially launching in 2016, Anchor has become the number-one podcast platform in the world. The company’s mission to “democratize audio” has led it to powering more than 15% of all podcasts on the market, according to podcast analytics company Chartable. Anchor has also tripled the number of podcasts that make money through advertising since it launched Anchor Sponsorships last year. So it’s little wonder how Anchor caught Spotify’s eye. Apple still dominates the podcast marketplace, but for Ek “to become the world’s leading audio platform,” Spotify needs scale. And how better to scale than with a company that’s often referred to as the YouTube of podcasts? Although that’s certainly possible, the question that lingers is: Can Anchor be the democracy it wants to be for creators under Spotify’s dominion? IT STARTED WITH A PODCAST About four years ago, Anchor cofounders Michael Mignano and Nir Zicherman were working at the photo-editing platform Aviary when they decided to try and start a podcast together. However, their plans came to an abrupt halt when they realized just fragmented and opaque the process was. “It was researching and figuring out what the best microphone is, figuring out how to edit audio, which neither of us had ever done before,” says Mignano, Anchor’s CEO. “We had to navigate all these paid services, like hosting your audio files and then submitting RSS feeds everywhere. It just felt really, really confusing.” Mignano and Zicherman, Anchor’s CTO, bonded over the frustration and thought that if they were struggling, other amateur podcasters were as well. So they created Anchor, a platform where creators can record, edit, and upload their content in a more streamlined process. Initially, podcasts created on Anchor could only be heard on Anchor. But Mignano and Zicherman quickly realized they were boxing in their users. Anchor co-founders Michael Mignano and Nir Zicherman. [Photo: courtesy of Anchor] “I think the biggest pain point that we repeatedly heard from people is, [Anchor is] easy and fun, but the truth is that nobody is listening on Anchor,” Zicherman says. “Listeners are on Apple podcasts, Spotify, Google Play, and Stitcher. We solved a lot of pain points on the creation side and we continue to, but let’s also solve this distribution problem. People want to reach their audiences wherever they are. Let’s try to lean into that and see if we can offer utility there.” “So a little over a year ago,” Mignano adds, “we released a whole new version of Anchor that was basically the first endto-end podcasting platform out there. And that’s when the floodgates really started to open.” Anchor’s success in attracting so many amateur podcast creators is what led Spotify to be interested in buying them (for north of $100 million). “Acquiring Anchor was a strategic decision for us because Anchor has completely reimagined the path to audio creation, enabling a wide distribution of podcasts to a global audience,” says Sten Garmark, Spotify’s VP of product. “We believe that Spotify and Anchor can enable a new generation of creators to create, find an audience, and monetize.” WHAT SPOTIFY CAN DO FOR ANCHOR Or better yet, as Mignano recalls, “Daniel Ek said it best to us in that they want it to give Anchor superpowers to enable us to move faster, to do bigger things with the resources and the backing of the world’s most forward-thinking audio company.” Spotify wants to amplify Anchor’s mission of enabling anyone and everyone to make a podcast. On the music side, Spotify is beholden to the whims of labels and their licensing fees and doling out billions in royalties. Podcasts are an opportunity for Spotify to claim content outright with exclusive originals (enter Gimlet and Parcast) and to become an aggregator through Anchor. “Increasing advertising revenue for the entire industry requires a centralized player that can leverage a large user base,” wrote independent tech and media analyst Ben Thompson in a blog post after the deal was announced. That said, because the majority of creators spread their podcasts among multiple outlets—including Spotify, Apple, Stitcher, and Google Play—directly monetizing non-exclusive content is tricky, unless creators can take advantage of something like Spotify’s Advertising platform. “Spotify is still a distant second to Apple in podcasts, but they are growing fast,” Thompson wrote. “Just as importantly, Spotify already has a strongly growing advertising business […] that it can extend to podcasts. Anchor provides a way to capture new podcasters, leading them either to Spotify advertising or, in the case of rising stars, to Spotify exclusives.” When it comes to podcast advertising, companies like Midroll have become the industry standard. However, it largely caters to podcasts with bigger audiences. [Photo: courtesy of Anchor] “The magic number everyone throws around [is] 50,000 downloads per episode. Then you need to hopefully attract a brand’s attention,” Mignano says. “The way that the brands are finding you is they’re going to the charts and they’re like, ‘This podcast looks big enough.’ Then they manually contact you and then maybe you get a deal done. Then somehow you have to get the data back to them and they cut you a check. It’s the most annoying process ever.” To curb that friction, Anchor launched its flagship monetization platform Anchor Sponsorships that matches creators with a brand and delivers host reads and payouts all through the app or site, with Anchor taking a 30% cut. Anchor also has Listener Support, a feature where listeners can donate between $0.99 to $10 to a creator, a tipping-style function that is the basis of podcast monetization in China. “The real focus there is enabling long-tail creators who don’t have big audiences–their audiences are probably hyperengaged and interested in maybe in really a niche topic. But you’re not going to get big brands to pay you big dollars for that show,” Zicherman says. “We believe that we can help more creators of all sizes earn more money while enabling more advertisers to reach their audiences in more authentic and effective ways,” Garmark says. “Anchor Sponsorships is the first step on this journey.” In conjunction with getting more money to creators, Anchor is also focused on providing more data to creators, long their number-one complaint of Apple’s dominance of the space thus far. “I’d say now, post-acquisition, one of the things we’ve been really focused on is analytics,” Mignano says. “Now that we’re part of this much bigger platform, there’s more data we can tap into, there’s more technology and infrastructure we can leverage to power what we’re doing.” “If there could be better transparency in podcasting overall, I think you would start to see new types of dollars flow into the ecosystem and grow the market,” he continues. “You hear these figures around podcasting’s that it’s a $350 million market in the U.S. right now. If you’re able to show value beyond what is currently possible through RSS and the current analytics, you would probably start to seeing new types of dollars.” Most podcasts rely on direct response dollars, i.e., ad reads that ask listeners to use a special code related to the podcast for discounts on products or services. By and large, it’s been the predominant way for a brand to know if they’re getting a return on their investment. “If you were able to give more insight to brands and sponsors as to whether or not people are listening or how they’re listening or where they’re listening,” Mignano suggests, “you would probably start to see the spend in the space skyrocket.” As of now, there’s no word as to how exactly Spotify will factor into Anchor Sponsorships. Could Spotify could take a cut in addition to or as part of Anchor’s 30%? Will Spotify turbocharge Anchor’s existing Rolodex of brands with its own? Will podcasts run ads in Spotify’s ad-supported tier? Nor is there any roadmap as to how Anchor will tap into Spotify’s analytics. But it stands to reason that all of the above will overlap in some capacity, which raises the larger question of how much of a democracy can Anchor be for creators when it’s clearly chosen a side in the podcast arms race. Anchor prides itself on being the podcast platform for the people, and both Mignano and Zicherman are adamant in saying that being part of Spotify will only amplify their mission. But as the podcast landscape welcomes new players to the space like the “Netflix of podcasts” Luminary or even with the possibility of Apple or Google snatching up a platform similar to Anchor, being backed by a company like Spotify could lend stability in an increasingly balkanized industry but at the same time chip away at a core value like democratizing audio. Spotify has very publicly stated that they want to go from the world’s leading music platform to the world’s leading audio platform. In that sense, what’s good for creators is good for podcasting, and good for Spotify. “Everyone would unanimously agree that distribution to all platforms is absolutely critical to what creators need right now,” Mignano says. “Spotify knows that. We know that. And if we were to change that, I don’t think we’d have a business.” Spotify Is Paying Up to $196 Million in Cash to Acquire Bill Simmons’ The Ringer Variety Feb 12, 2020 1:37pm PT By Todd Spangler Courtesy of HBO Spotify disclosed that it will pay upwards of $196 million for The Ringer, the podcast and media company founded by Bill Simmons. The streaming music and audio company said it entered into a deal to acquire Bill Simmons Media Group for between €130 million and €180 million in cash (approximately $141 million to $196 million at current exchange rates), subject to closing adjustments, a portion of which is deferred, according to a company SEC filing Thursday. The deferred payouts are contingent on performance and Simmons and certain other Ringer execs remaining with Spotify. The deal is expected to close in the first quarter of 2020. Spotify is acquiring The Ringer, founded by ESPN alum Simmons in 2016, as part of bulking up its portfolio of podcasts. The Ringer produces more than 30 podcasts from Simmons and the startup’s staffers as well as personalities including David Chang and Larry Wilmore. The acquisition of The Ringer will bring “highly loyal sports and culture fans to the platform,” Spotify CEO Daniel Ek said on the company’s Feb. 5 earnings call. “The trend that we’re investing in is that radio is moving online,” he said. Apparently referencing Simmons’ ESPN background, Ek added, “What we really did with The Ringer, I think, is we bought the next ESPN.” In 2019, Spotify acquired three podcast companies — Gimlet Media, Anchor and Parcast — paying some $393 million for them, with additional payment incentives over four years contingent on employment, according to regulatory filings. The Gimlet deal was worth about $189 million (€172 million) plus up to $44 million in incentives; Anchor was $150 million (€136 million) plus $22 million in incentives; and Parcast was $54 million (€49 million) plus up to $11 million in incentives. In announcing record quarterly Premium subscriber adds in Q4, Spotify said it would continue to invest in podcast content and infrastructure and claimed podcast listening hours grew nearly 200% in the last three months of 2019. Spotify, in its filing Wednesday, also said that in the first few weeks of 2020 it signed license agreements with “certain music labels and publishers and podcast agreements with creators,” which comprise minimum guarantee and spending commitments of approximately $200 million (€186 million) over the next three years. The Ringer Podcast Network’s podcasts include consistently top-ranking shows “The Bill Simmons Podcast,” “The Rewatchables” and “The Ryen Russillo Podcast.” The company’s original video content includes “NBA Desktop” and has included after-shows for HBO’s “Game of Thrones” and “Big Little Lies” started streamed exclusively on Twitter. While at ESPN, Simmons built up a sizable online following as an on-air commentator and also as the head of the Grantland news and commentary website. In May 2015, ESPN ousted Simmons after he engaged in public clashes with higher-ups. T EC H Spotify to buy podcast ad company Megaphone for $235 million CNBC PUBL I SH ED T U E, N OV 10 20 20 9: 00 A M E STU PD AT ED TU E, N OV 10 20 20 1:4 6 P M E ST Megan Graham @ M EG A N CG RA H AM KEY POINTS • • • Spotify has been on a podcast acquisition tear in the past couple years, striking deals for shows from Joe Rogan, Kim Kardashian and Michelle Obama and buying companies like The Ringer and Gimlet Media. Now, it’s taking steps further to monetize all that content with the help of a new acquisition. Spotify said it has entered into an agreement to acquire Megaphone, which offers technology for podcast publishers and advertisers seeking targeted slots on podcasts. Daniel Ek, chief executive officer and co-founder of Spotify AB. Akio Kon | Bloomberg | Getty Images Spotify is making yet another podcast acquisition. The company said Tuesday it has agreed to acquire ad tech company Megaphone in a $235 million deal. The companies declined to say whether the deal was in cash, stock or a mix. Spotify shares were down 6.5% on Tuesday afternoon. Megaphone offers technology for podcast publishers and advertisers seeking targeted slots on podcasts. It offers podcast hosting, distribution and ad-insertion tools for podcast publishers like ESPN and The Wall Street Journal, and advertisers can use the company’s technology to find audiences across the podcast content of those publishers. Spotify has been on a podcast acquisition tear in the past couple years, striking deals for shows from Joe Rogan, Kim Kardashian, Michelle Obama and others, and buying companies like The Ringer and Gimlet Media. Now, it’s taking steps further to monetize all that content with the help of a new acquisition. Megaphone, previously called Panoply Media, rebranded in 2019 after laying off its podcast production team to focus on the technology platform side of its business. The company has been owned by Virginia-based Graham Holdings Co. The deal should give advertisers more scale in terms of whom they can reach on Spotify and let podcast publishers opt in to have their shows monetized. After the transaction closes, Spotify said, it will make its “Streaming Ad Insertion” tool available to all podcast publishers through Megaphone’s technology, the first time it will open that tool beyond its own original and exclusive podcasts. The company has said that tool makes ads “targetable — they’ll be relevant to the people who get them; measurable — we’ll more easily prove that they’re effective; and interactive.” Advertising has constituted a relatively small portion of Spotify’s revenue, but the company’s leadership has said it’s optimistic about the advertising opportunity. During its third-quarter earnings, the company said 22% of its total monthly average users engaged with podcasts last quarter and that podcast ad revenue was up nearly 100% year over year. The company says its podcast catalog has more than 1.9 million titles. “I think there’s been very little innovation, particularly on the podcasting side in terms of how to better target advertising and allow creators to actually monetize their product in a much higher way,” CFO Paul Vogel said on its thirdquarter earnings call. “And I think our ability to help bring those tools and services into the ecosystem will be great for the overall growth of business, it will allow creators to actually make more money off of their podcasts. And I think it will benefit us as well.” Amazon Corporate Strategy On line retail Prime Video Amazon Go Firestick, Echo, Fire tablet Amazon Web Services Design R&D and design Amazon Studios R&D and design Manufacturing 3rd party/Amazon house brands Contract manufacture Production of video - use 3rd party Physical stores built by contractors Distribution/Warehousing AWS Amazon warehouses AWS Amazon develops in house Website applications - marketing/sales, selection, purchase, delivery Logistics/Shipping Use the website Prime membership AWS USPS, Fedex, own delivery service - vans and planes Prime membership Customer service Spotify Corporate Strategy Content Creation Content Production App development and streaming ability Marketing & sales Data collection and analysis