Was Spotify’s acquisition of Gimlet and Parcast ultimately a waste?
This is how union employees of Gimlet and Parcast describe Spotify’s decision on Monday to begin closing the two podcast studios the audio giant bought for 221 million euros in 2019. “When Spotify bought Gimlet and Parcast for nearly $300 million, they gained an incredible group of talented people with specific and marketable skills. They then squandered that opportunity: canceling shows with committed audiences, letting half-finished projects die on the vine and giving teams little direction on what they actually wanted to see produced,” the Gimlet and Parcast unions said. “Gimlet and Parcast were visionary studios that helped shape our industry. Whether Spotify Studios has a vision remains to be seen.”
Four years after their acquisitions, Gimlet and Parcast will go under this summer as they form Spotify Studios, an in-house studio division led by Julie McNamara. Parcast general manager Liliana Kim will stay on to oversee what Spotify describes as “current content”, which includes podcasts such as The news And Science vs, while Nicole Beemsterboer, general manager of Gimlet, is about to leave. Liz Gateley – who previously led originals for Spotify, transitioned to an advisory role in 2020 and returned full-time a few months ago – will once again lead the development of originals such as Spotify’s DC Comics podcasts.
In other words, Monday was the latest round of layoffs and organizational reshuffles to hit Spotify’s podcast business, which was already undergoing major changes in May 2022 and again last January. While Spotify Studios will continue to produce shows previously under the banner of Gimlet and Parcast and continue to greenlight new projects, the effective demise of the Gimlet and Parcast studio brands marks a bitter end to an era of podcasting when streamers such as Spotify experienced a frenzied wave of acquisitions where smaller podcast studios were scooped up for large sums of money in exchange as part of a podcast company’s expansion and growth potential.
But when the revenue side didn’t pan out as hoped, the Spotify division also became a Wall Street target for budget cuts. Following the layoffs and restructuring revealed by the audio giant, Guggenheim Securities analyst Michael Morris called the move a “step toward appropriately sizing podcast costs and related operating expenses amid a period of slower revenue growth,” noting that the unit was “subordinated” to the “Core” music division and budget cuts will help the podcast unit reach quarterly gross profit breakeven by the end of 2024, he predicts.
Not all 2019 and 2020 podcast M&A activity has ended in failure, particularly for studios like Wondery, which was acquired by Amazon in a $300 million deal in 2020, and Pineapple Street Studios, which was acquired by Audacy in 2019. was snapped up for a reported $18 million. (Cadence13, which bought Audacy in a $50 million deal in 2019, is staying with the company after sales talks fell through.)
But even disregarding the fate of Gimlet and Parcast, the money and interest may not even be there for a major company like Spotify to close multimillion-dollar acquisition deals for podcast studios this time around, leaving the future up in the air for narrative podcasting stores. such as Luminary and QCODE that once seemed like top acquisition targets.
Larger companies such as the music live streamer LiveOne announced in May that they intended to launch the podcast studio Kast Media (The Sarah Silverman PodcastLogan Pauls Impulsive, The OC rewatch podcast with Rachel Bilson and Melinda Clarke). But the potential all-stock deal, which fell through, would only be for certain Kast Media assets and would be timed to bolster LiveOne’s subsidiary PodcastOne, which is expected to be spun off into a separate public company later this year.
But when it comes to big acquisition deals for smaller studios that focus on narrative or investigative series, like Gimlet, “I don’t know if those deals can ever happen again,” said John Perotti, Rococo’s co-founder and chief content officer. Punch, says The Hollywood Reporter. “In my experience, it doesn’t seem like anyone is chewing on making another offer like that.”
The difficult podcast market and declining spending helped push Rococo Punch, which Perotti runs with its co-founder Jessica Alpert, to merge with Audily, a full-service podcast and audiobook company led by president Matt Wells.
“When we looked at the landscape at the beginning of the year, we said, well, we’re having a really hard time producing narrative stuff and just all the stuff we made the way we normally did, right? No one wanted more short series It was really hard to even get through busy things all the time. Everyone had their expenses frozen,” recalls Perotti. “When we kind of sat there, we were like, what can we do? we this up?”
The deal keeps Rococo Punch, which has produced shows such as Welcome to Provincetown but also creates educational and work-for-hire projects, as an independent entity within Audily. And perhaps most unlike the Spotify-Gimlet-Parcast deals, Perotti doesn’t see much overlap between Rococo Punch and Audily.
“We are a bigger company, but we are not a big company that all does the same thing. We don’t step on each other’s toes. We don’t necessarily create the same content, but I think we can help their customers and they help our customers,” says Perotti. “We’re looking for different things.”
Will this solution still be sustainable in a year or two? Perotti does not have a crystal ball, but he sees the merger with Audily as the right step forward to keep Rococo independent and still run.
“I hope there are a lot of small businesses out there thinking about doing what we do, because it feels…like weatherproofing your business for what’s to come,” says Perotti. “We made a smart choice and we wait to see what happens in the industry.”
