The controversy highlights that podcasts are likely more important to the streaming giant than music.
Rust never sleeps, and apparently neither does social media or controversy.
Earlier this week, rock and roll legend Neil Young called for his music to be removed from the streaming giant Spotify (SPOT) – Get Spotify Technology SA Report, citing the misinformation about COVID-19, and its attendant vaccines, that are regularly offered by podcaster Joe Rogan. “They can have [Joe] Rogan or Young. Not both,” said Young, a survivor of childhood polio, in a statement.
Rogan’s popular podcast “The Joe Rogan Experience,” is one of the most popular in the medium. It’s also a Spotify exclusive that the streaming service paid a rumored $100 million to acquire in 2020.
Spotify didn’t acquiesce to Young’s demands to get rid of Rogan, and the songwriter had his catalog removed. In wake of the controversy, #CancelSpotify began trending, Spotify’s streaming competitors are using the flare up to get some free publicity, while critics of the service are using it to make a point about the service’s priorities.
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Joe Rogan Brings In Both Listeners And Headaches
You can love Joe Rogan or you can hate him, but there’s one thing that can’t be denied about him: the former sitcom actor turned reality show host and mixed martial arts commentator is one of the most popular podcasters in the world. In fact, he’s arguably the most popular podcaster, period.
Though some observers thought that signing an exclusive deal with Spotify would limit his audience, he nonetheless had the most popular podcast on Spotify last year.
By signing an exclusive deal with Rogan, Spotify gains access to his loyal fanbase but is also quite often in the awkward position of seeming like they are condoning his controversial statements.
Rogan has been widely accused of both transphobia and Islamophobia, and Spotify staff members have reportedly pushed Spotify CEO Daniel Elk to remove episodes they deemed transphobic, which he declined to do after an all-hands staff meeting. However, the company has been known to remove some episodes of Rogan’s podcast, including an interview with Proud Boys founder Gavin McInnes.
While Apple Podcasts’ have restriction on content “that may lead to harmful or dangerous outcomes,” Spotify “like other tech companies that distribute media, is fundamentally uncomfortable making decisions about what kind of media it does and doesn’t want to distribute,” as noted by Vox.
Rogan has a history of making statements about COVID-19 and the effectiveness of the vaccines that that have drawn criticism from the medical community, such as a statement that younger people don’t need to get vaccinated, stating “if you’re like 21 years old, and you say to me, should I get vaccinated? I’ll go no.” In response to the outcry from the statement, he later clarified “I’m not an anti-vax person,” Rogan said. “I believe they’re safe and encourage many people to take them.”
The latest flashpoint occurred in December, when Rogan interviewed Robert Malone, a scientist and mRNA vaccine skeptic who has been banned from Twitter for spreading misinformation, and stated at a recent anti-vaccine rally in Washington, D.C. that “the science is settled. They’re not working.” (Scientists have repeatedly pointed out that this is incorrect.)
Spotify’s Competitors Jump Into The Fray
Some commentators believe this ongoing scuttlebutt paints Spotify in a bad light by making them look indifferent in the face of a public health crisis, while others have applauded the company for not capitulating to public pressure and defending Rogan’s right to free speech.
But either way, in the long run, the dust-up between Young and Spotify isn’t likely to do much to hurt the streaming service’s bottom line, as it remains the most popular audio streaming service, with 381 million Monthly Active Users and 172 million Premium Subscribers according to its most recent earnings report.
When you’re the number one, there’s always going to be competitors looking to take your spot, and many of the streaming giant’s competitors took to social media to take advantage of the controversy, and to point out that there’s plenty of places to stream classic young albums like “Rust Never Sleeps” and “After the Gold Rush.”
Spotify has become so synonymous with streaming music that companies like Tidal, Deezer, and SiriusXM (SIRI) – Get Sirius XM Holdings, Inc. Report no doubt welcome the opportunity to remind people that there are other options out there.
Why Spotify Backed Joe Rogan
One Tweet that has gained traction online was from Damon Krukowski, a musician who played in the influential indie rock band Galaxie 500 who had become a leading critic and commentator on the digital music sphere.
Depending on your point of view, this statement is either a withering diss of Spotify, or a clear-headed assessment of the company’s business model.
It’s objectively true that Spotify’s main interest is getting people to spend as much time on its platform as possible, which is why its growth strategy has been heavily focused on podcasts for the past few years.
Amidst competition from Amazon and Apple, the company has been looking to become less dependent on music and has been on a content buying spree lately, acquiring podcast companies such as Gimlet Media, Anchor FM Inc. (a company that helps people make their own podcasts), Parcast, and the sports/entertainment website and podcast network The Ringer.
Spotify has struggled to make money largely because streaming music carries a low profit margin. The company noted that it has improved its margins due to its investments outside of streaming music.
“Gross margin finished at 26.7% in Q3, above the top end of our guidance range and reflecting nearly 200 bps of Y/Y expansion. The gross margin improvement reflected a favorable revenue mix shift towards podcasts, marketplace activity, improved music advertising operating leverage, and other cost of revenue efficiencies (e.g. payment fees, streaming delivery costs), which were partially offset by higher non-music and other content costs and publishing rate increases,” the company wrote in its Q3 earnings report.
Spotify lost $0.41 per share in its most recent quarter and expects losses to continue into Q4. The company does have roughly $3.6 billion in cash on hand to fund continued losses and acquisitions.
