Wiser! #59 (Premium): Joe Rogan has kicked up a shitstorm for Spotify, which begs the question about responsibility for content moderation. Meanwhile, competition for attention from Apple Music and TikTok threatens Spotify's market leadership.
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Don't Shoot The Messenger
Intro: The question of platform v media co was triggered by the current debate over the Joe Rogan Experience on Spotify. It’s also the question that dogs social media as the likes of Facebook, Twitter and YouTube hide behind the defence that they are platforms, not media companies. In other words, don’t shoot the messengers.
But, this time the debate is different. Because Spotify paid Joe Rogan a reported $100m for exclusive rights to his podcast, which had been a free-to-air show prior to the Spotify deal in 2021. Spotify credited the Joe Rogan show for boosting ad revenues in their SEC filing of March 2021.
Meanwhile, as Joe Rogen dominates attention, Spotify is looking over its shoulder at competition from Apple Music and the short attention spans of the TikTok generation.
In the latest issue of Wiser! Insights, I take a looking into what’s happening at Spotify, the world’s number audio streaming platform.
Has Spotify gone too far with the Joe Rogan Experience?
BackStory: This story first broke on January 10th when 270 public health experts wrote an open letter to Spotify CEO Daniel Ek to complain about a podcast called The Joe Rogan Experience.
The Joe Rogan Experience is Spotify's headline act and their biggest deal ever, reportedly costing $100m. But it is controversial. At a staff meeting last Sept, CEO Daniel Ek reportedly said he'd had 10 separate meetings with groups who want to see Rogan off the world’s largest audio platform.
In the open letter, the 270 doctors, scientists & professors wrote to criticise Joe Rogan for spreading Covid misinformation in his podcast that has an audience of 11 million. The public health experts called Spotify “flashing red siren irresponsible” for allowing the show to be aired.
The podcast at the heart of this issue was with a virologist called Dr Robert Malone. Rogan (and Spotify) allowed Malone to falsely claim unchecked that hospitals are “financially incentivised” to attribute deaths to Covid. Dr Malone also told Rogan's 11 million podcast listeners that world leaders have “hypnotised” the public into believing the vaccines work
The health experts called the Malone interview “a sociological issue of devastating proportions.” The health experts also called on Spotify to develop a misinformation policy (because they didn’t have one, although they do now, which I will come onto shortly).
Meanwhile, YouTube took down the video of the Joe Rogan episode with Dr Malone because it “violated YouTubes rules on spreading Covid misinformation”. At this point, Spotify did nothing, whilst Joe Rogan continued to get a ton of publicity.
Music artists Neill Young, Joni Mitchell and Nils Lofgren all publicly protested to Spotify about the Joe Rogan show. And all were told to take it or leave it by Spotify. Which they did, and promptly withdrew their music from Spotify in protest.
Note: Neill Young (the 11th ranked highest-earning musician of all time) and Joni Mitchell both had polio as kids. The issue of vaccines is personal to them. By giving up their Spotify listings, Billboard Magazine has estimated that they will lose 10% of their income.
Another of Spotify’s star podcasts, Brené Brown, said that she would not release any more podcasts “until further notice”. Whilst ex-Royals Harry and Meghan added their voices to the criticism of Rogan. Apparently, they had already expressed concerns about the Rogan Show a year ago. (Remember, Harry and Meghan have a $30m deal with Spotify, although they've yet to do anything other than a 1-off podcast.)
When Spotify finally responded
The Reaction: Over the weekend, Spotify CEO Daniel Ek broke the silence and spoke out publicly.
In an open letter, Ek announced a policy on how misinformation would now be handled. He was very clear that misinformation, especially when it comes to vaccines and false claims that Covid is fake, would “not be tolerated”. The new Spotify policy says;
"Spotify prohibits content that asserts AIDS, COVID-19, cancer or other serious life-threatening diseases are a hoax or not real. The platform also bans content that encourages people to purposely get infected with COVID-19 in order to build immunity and doesn’t allow content that suggests vaccines are designed to cause death.”
Ek explained that the execs at Spotify had taken time to reconsider their policies in the "interests of maintaining balance."
For what it’s worth, I don’t buy the balance argument. There is no “balance” between an opinion and science. Giving equivalence to both opinion and science is to treat them with equal validity, which they are not. You can believe the earth is flat but that doesn't mean that it is.
It's beyond me why this claptrap was and is still tolerated by Spotify, even with the new zero-tolerance policy. But I suspect that Spotify would cite 100 million reasons why they don't want to "take on the position of being (the) content censor" (as per the statement from Ek).
In making his defence, Rogen posted a 10-minute video on his Instagram account to explain his side of the story. He was apologetic, contrite and appeared to be thoughtful. Will that be the end of it?
I doubt it, but we'll have to wait and see.
For now, Rogan will have to get used to having a big disclaimer label at the front of every show that includes more of this type of misinformation. Which unfortunately will not make a whole lot of difference and only serve to strengthen the bias of those who already want to believe the conspiracy theories peddled as “alternative facts”.
Meanwhile, Ek and the Spotify exec have other challenges to deal with, such as maintaining their position as the market leader in an increasing competitive space.
Spotify’s market position is under attack
Positioning: Today, Spotify is the most popular audio streaming service in the world. It has a library of over 50 million songs and, according to Spotify, a 35% market share of the global streaming market. The latest figures show that are more than 381 million active monthly users listening to an average of 25 hours of Spotify a month.
Almost half of them (172 million) pay for the Premium subscription service, which is their primary source of income (2020 Revenue was $7.88 billion of which $7.14 billion was Premium Subscriptions).
The amount Spotify pays artists every time their music is streamed varies, but the payouts are reported to be as low as $0.00318 per stream (that’s 314 plays to earn $1).
However, Spotify faces more competition now than it did when it defined the audio streaming market in 2006. Their biggest competitive threat comes from Apple Music, which started a decade later than them. Apple Music has one significant competitive advantage over Spotify...it is owned by Apple.
Apple owns the rails which means that they control distribution (through the App Store) and they control the user experience (through privacy controls and prohibition of tracking). Luckily for Spotify, they have a lot of 1st party data (1/3rd of all music listened to is made by algorithmic recommendations.), nevertheless, like every other business, Apple’s squeeze on data privacy will have an impact.
The Epic Games court case has significance to Spotify because Apple (and Google too) take 15% of all Spotify revenues that go through Apps downloaded from the app stores. Spotify is a 25-26% Gross Margin business. Imagine the impact to margins if they didn’t have to pay a 15% tax to Apple and Google?
Apple Music’s other big advantage is that it comes pre-installed on every iPhone, iPad and Mac computer. That’s over a billion head-starts in the race for your attention. Added to that, if you want the Spotify app on your iOS and OSX device, Apple does not make it easy to find it.
Just try going to the App Store and typing “Spotify” in the search bar and see the results that you get back.
Spoiler Alert: you won’t get the Spotify app as the 1st, 2nd, 3rd....result.
TikTok is changing the way that music is consumed
What's going on: The competitive landscape for Spotify is also a demographic one. Spotify has a problem getting the attention of the Gen Z population (people born between the late 1990s and the early 2010s.) This is the generation that is drawn more to TikTok.
It used to be said that TikTok was a friend and a funnel for Spotify. TikTokers would hear a 30-second snippet of a song on TikTok and go to Spotify to listen to the whole thing. But that changed when TikTok increased the max video length to 3 minutes, long enough for the whole song. Now, TikTok has introduced its own music streaming service called Resso, which is currently being rolled out in Brazil, India and Indonesia.
Spotify isn’t alone when it comes to battling for a younger user’s attention against TikTok. This is an issue that is affecting Facebook, Instagram, Twitter and Netflix, who all have issues attracting the youngest consumers away from TikTok.
Spotify has sought to increase appeal to Gen Z podcast listeners by doing deals with social media influencers like Alex Cooper and Addison Rae. Cooper’s show “Call Her Daddy” is popular among women who are elder Gen Z (women aged 20 to 24).
Spotify is also working on new tools it says are helping music listeners. ‘Blend’ is a shared playlist between friends that has shown strong appeal amongst Gen Z accounts, as has Spotify's annual viral music campaign called 'Wrapped'.
One this that is for sure is that Gen Z’s music taste is definitely different from the core Spotify user. The two top acts reported by TikTok for 2021 were Doja Cat and Megan Thee Stallion. Neither ranked in Spotify’s top music list.
To compete against TikTok (which basically means copying what TikTok is doing), Spotify is testing a new feature that will offer snippets of songs set against a vertical video. This will also be available for podcasts with short snippets of audio alongside text that appears on the screen. The logic is that shorter form video appeals more to younger users.
It’s also true that shorter segments generate substantially more signal data to better understand the user’s true interests and attention grabbers. This is what makes TikTok so addictive. (I wrote about it here.)
The genius of TikTok isn’t just some magic algorithm. It’s that by offering videos just 15 seconds in length, it collects more data about its users’ taste than just about any other media company.
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w/Sources of Insight and Information
Reference Sources:
Spotify has a Gen Z problem. Source: Bloomberg
ByteDance quietly racks up users for its music streaming app in global push as TikTok sale looms. Source: CNBC
How Millennials and Gen Zs Are Redefining Digital Audio. Source: Spotify
Call Her Daddy: Spotify Nabs Exclusive Multiyear Deal With Alex Cooper. Source: Variety
Year on TikTok 2021 Music Report. Source: TikTok Newsroom
Spotify explains COVID-19 misinformation policy, hints Joe Rogan is safe. Source: Los Angeles Times
Op-Ed: Neil Young can't persuade Spotify to stop COVID misinformation. Source: Los Angeles Times
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