How $1bn push into podcasts led to Spotify’s growing pains

He was supposed to be Spotify's biggest acquisition, one who would transform the music streaming company into a one-stop shop for all kinds of online audio.

But controversy over "misinformation" on Joe Rogan's podcast precipitated a hellish week for the Swedish firm as high-profile boycotts, a social media backlash and a share price drop challenged the viability of its meteoric growth.

With questions mounting over whether streaming companies pay artists their proper due, a second and arguably bigger issue has emerged: whether Spotify can be held responsible for all of the material on its platform.

The row started when a group of more than 250 US professors and public health officials called on the company to crack down on Covid-19 misinformation after an episode of The Joe Rogan Experience included "several falsehoods" about vaccines.

Later, when Neil Young issued an ultimatum to Spotify to remove either his music or Rogan's podcast from its platform, the company chose to back Rogan, whose podcast is its most popular, with an estimated audience of 11 million.

Prince Harry and Meghan Markle, who have a podcast deal with Spotify, said they had previously raised the issue of misinformation with the company. On the same day that Spotify staff were reportedly up in arms about the chief executive Daniel Ek's defence of Rogan, there was an intervention from the White House calling on it to "do more".

But when Spotify paid a reported $100m (£73m) in 2020 for an exclusive licensing deal with Rogan, known for his brash and often polarising content featuring members of the so-called "intellectual dark web", it made a value judgment that the boost to revenue was more attractive than avoiding any future controversy.

At the time, Spotify had begun to assert itself as a key player in the podcast world, buying up rights to more and more shows, including from the Obamas. It has now spent more than $1bn on podcasts, with revenues from podcasts up 627% year on year.

"To be frank, had we not made some of the choices we did, I am confident that our business wouldn't be where it is today," Ek is reported to have told staff this week.

According to Mark Mulligan, an analyst at Midia Research, "Spotify with Joe Rogan is where Netflix was with House of Cards. It's original audio content." He explained that when Spotify got going, "radio basically owned the rest of the audio business, but in the intervening years podcasts have become much bigger. If it wasn't doing podcasts, other companies would take some of its listening time away."

Spotify, he added, "doesn't own the music catalogue, it's entirely dependent on record labels. A podcast is a way of saying 'we'll invest in our own content and we'll generate a much higher profit from that content'."

The debate has become larger than Spotify itself, touching on the cornerstones of today's culture wars such as free speech and censorship. MailOnline ran an article headlined "Why Spotify must stand up to the luvvie bullies trying to stifle free speech - especially if Meghan and Harry join the Joe Rogan witch-hunt". Another in the Hill read: "Can Joe Rogan save free speech?"

Andrew Hartman, the author of A War for the Soul of America: A History of the Culture Wars, said the dustup was the latest in "a long list of controversies over pop culture and censorship, with capitalism and commerce in the mix."

Most of these battles, Hartman said, had historically entailed efforts by conservatives, often religious conservatives, to censor liberals wishing to express transgressive views - for example, efforts to censor Martin Scorsese's Last Temptation of Christ. "Now we have liberal musicians working to kick Joe Rogan off a platform for expressing or giving voice to views that are seemingly conservative," he said.

All of which leaves Spotify facing a heady cocktail of crises. The UK's competition watchdog recently launched a study of whether streaming services such as Spotify hold excessive power, after a scathing report by MPs called for a "complete reset" of a model in which they said only big labels and superstar acts profit.

"It's like waiting for a bus," Mulligan said. "Suddenly, many crises will come along at the same time. Arie removed her catalogue because of an episode Rogan did on race. Now more and more artists will be looking at all the other stuff he's said, and other podcasts Spotify is supporting, and think: is this the place I want my music?"

But comparing and contrasting streaming companies is difficult business. Since leaving Spotify, Young has directed his fans to use Amazon Music to stream his songs - a company criticised for its treatment of workers. His music remains on YouTube, which factcheckers say is a major conduit of fake news.

"Surely there is misinformation on YouTube, Apple and Amazon, much of it worse than Rogan's show - why are these artists not withdrawing from them too?" said David Hesmondhalgh, a professor of media, music and culture at Leeds University.

While Spotify continues to retain more paying subscribers than any other audio streaming service (more than 406 million monthly users and 180 million paying subscribers), its market share is declining. This week the company's shares briefly fell as much as 18% after it forecast current-quarter subscribers lower than expectations.

"If I was Spotify I'd be more worried about that than about the Joe Rogan debacle," Mulligan said. "The attention economy - how much time we spend with stuff - was peaking before lockdown and then boomed when everybody had a lot more time on their hands. That was always going to start receding when normal life resumed."