1/ Why would Spotify pay such a premium for @Gimletmedia (rumored 8-12x revenue!)? Why not just buy enough talent to replicate it (i.e. build v. buy)?
2/ Gimlet has executed superbly to date. Truly superbly. It’s really not clear that you can buy talent that will, or even can, produce similar results – even with more capital. And even then, it would take 2-3 years
3/ Similarly, Gimlet has a strong pipeline already in place – not just of current+library shows, but also future shows. It’s like a pharmaceutical. You can start your own drug research, but there's both a lag and a volume challenge
4/ Spotify needs differentiation + podcast content/capabilities today, not tomorrow – especially before Apple starts bundling Apple Music w/ other products & services It’s a big market, but time and subscriber growth is usually more valuable than money (if you can access it)
5/ Maybe Spotify overpaid, but Gimlet consumption (+M&A dollars) also offset royalties. You can’t double count this. Spotify pays billions a year in royalties (on a marginal basis, versus fixed). Gimlet is theoretically easy to recoup, trivial in comparison, and a fixed cost
Fin/ For all startups, there's value in not being distracted. Buy Gimlet, you just move forward. You don’t need to undertake a multi-month hiring program, strategy process, begin soliciting pitches etc. It’s ready.
(Mea culpa: I once told a VC not to invest in Gimlet. I liked their success to date and the team, but content production tends to be only a good business for founders + operators. Talent was good, but didn't assure true out-performance. But @Gimletmedia ****ing killed it.)
You can follow @ballmatthew.
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