Spotify (SPOT 0.20%) shares fell 6% last week while the broader market traded sideways. The drop was triggered by classic rock icon Neil Young, who removed his music from Spotify's media-streaming platform as a protest against big-ticket podcaster Joe Rogan's characterization of COVID-19 information.
Young's move may have looked pointless at first, pitching the aged rocker against a fresher voice with a $100 million Spotify contract. However, the protest is prompting Spotify to update its terms of service as Rogan promises to improve his content quality.
Here's what the Young-versus-Rogan showdown means for Spotify and its investors.
Image source: Getty Images.
Young brought some friends to this fight
A handful of other musicians have joined Young's cause. Singer/songwriter Joni Mitchell quickly pledged to remove all of her music from Spotify, "in solidarity with Neil Young and the global scientific and medical communities on this issue." Bruce Springsteen guitarist Nils Lofgren, who started his career in Neil Young's backing band, Crazy Horse, also cited the healthcare community when he removed his own catalog from Spotify. And former bandmate David Crosby made it clear that he supports boycotting Spotify, but he can't actually do anything about it. "I would do the same if I could," Crosby tweeted, but he sold the recorded and publishing rights to his music to Iconic Artists Group last year.
Here's the Spotify footprint of Neil Young and the artists who pledged their support:
|
Artist |
Monthly Spotify Listeners |
|---|---|
|
Neil Young |
6.0 million |
|
Joni Mitchell |
3.7 million |
|
Nils Lofgren |
220,000 |
|
Total |
9.9 million |
Data source: Spotify.
Facing off against this group, Rogan signed a multiyear exclusive licensing deal for his podcast in the spring of 2020. This deal was reportedly worth $100 million, and The Joe Rogan Experience draws about 11 million listeners per episode -- several times per week.
Even if you throw in 2.7 million monthly listeners for Crosby, Stills, Nash, & Young, 2.5 million for Crosby, Stills, & Nash, 290 million for David Crosby himself, and 3.2 million Buffalo Springfield fans, it's still not a fair fight. I don't know if Springsteen's recent catalog sale would allow him to follow suit, but even his 13.4 million monthly listeners pale next to Rogan's massive audience.
Judging this duel by listener impact alone, that's a runaway victory for Team Rogan.
The direct results
The protest reportedly sparked a wave of canceled Spotify subscriptions, harsh enough to clog up the company's cancellation process. Meanwhile, rival music service Apple (AAPL -0.35%) Music called itself "The home of Neil Young" in a widely retweeted post. Young himself posted a promotional link to Amazon (AMZN 3.43%) Prime Music, offering an extended free trial period.
That's more than a storm in a teacup. Young's fans can easily find his music elsewhere, making it easy to cancel their premium Spotify subscriptions and pick a different platform. That's potentially bad news for Spotify. Rogan, on the other hand, has an exclusive contract with Spotify, so you won't find his podcast anywhere else. The outflow of subscribers could grow large enough to change Rogan's bargaining position when his current deal comes up for renewal.
Image source: Getty Images.
Spotify and Rogan react to the troubles
Rogan published an Instagram video on Sunday, never quite apologizing for his coronavirus coverage. Rogan did say that he will "maybe try harder to get people with differing opinions on right afterwards," after posting controversial podcast episodes.
Spotify also took action on Sunday. In a press release attributed to CEO and co-founder Daniel Ek, Spotify published the platform rules that have purportedly governed Spotify's content for years. For the first time, these rules are now publicly available and transparent. The company is also planning to add content advisory tags to any podcast episode that discusses COVID-19, providing links to official information about the pandemic. Content creators are advised to avoid dangerous or deceptive statements, though the consequences of breaking these rules are limited:
We take these decisions seriously and keep context in mind when making them. Breaking the rules may result in the violative content being removed from Spotify. Repeated or egregious violations may result in accounts being suspended and/or terminated.
Under this language, Spotify doesn't seem required to punish Rogan for a single instance of supposed COVID-19 misinformation. If the podcaster makes a habit of posting dangerous or deceptive episodes, there's room for some stretching of these limits before Spotify is forced to remove the offensive content or end the high-dollar contract with its most popular maker of exclusive content.
Keep an eye on Spotify's guidance
Expect some discussion of the platform rules in general and the Rogan/Young situation in particular when Spotify reports fourth-quarter results on Wednesday, Feb. 2. This incident will not make a difference to the reporting period that ended on Dec. 31, but the fallout may weigh on Spotify's guidance for the first quarter and full fiscal year of 2022. Stay tuned.
