Spotify’s $100m+ Joe Rogan deal redefines its podcast strategy. Songwriters and record labels should be watching closely.

It’s interesting, when you think about it, that many of Spotify‘s biggest rivals – Apple Music, Amazon Music, YouTube Music, Tencent Music – have proudly chosen to singularly define their brands with one type of content: music.

Spotify, of course, is now much more than a music service. It’s “the largest audio platform in the world”.

That’s how comedian Joe Rogan described SPOT when making the game-changing announcement yesterday (May 19) that one of the globe’s biggest podcasts, The Joe Rogan Experience, is moving exclusively to Daniel Ek‘s platform.

From the end of this year, both audio and video versions of The JRE will only be available on Spotify, via a licensing deal that the Wall Street Journal suggests will cost Daniel Ek’s company over $100m.

Rogan’s ‘cast is known for its sometimes fascinating, always freewheeling conversations with figures from across the spectrum of politics and celebrity. The show’s typical length runs between two and three hours, with previous guests including Elon Musk (who famously smoked a joint during recording, pictured), plus Bernie Sanders, Candace Owens, Kevin Hart, Mike Tyson, Russell Brand, Malcolm Gladwell and Michelle Wolf.

It’s also hugely popular. In April last year, Rogan stated that his podcast was being downloaded 190m times each month. The JRE was the most popular podcast on Apple platforms last year, beating the New York Times’ The Daily into second spot.

Meanwhile, Forbes suggests The Joe Rogan Experience is currently making $30m in revenues per year, though whether Spotify will get a cut of that number – and how SPOT’s own podcast ad tech might affect it – currently remain unknown.


Spotify’s Joe Rogan scoop, then, is a major blow to Apple Podcasts, and will also disgruntle YouTube, where The JRE’s ‘vodcasts’ have attracted over 2 billion views to date.

What, though, does the deal mean for the music industry on Spotify, still the largest music subscription streaming platform in the world?

Both record labels (and artists) and music publishers (and songwriters) should be watching the Joe Rogan deal – and Spotify’s current predilection for spending big on exclusive podcasts – very closely.

Here’s why, for both sides of the industry…


1) music publishers (and songwriters)
  • “Spotify is not making a fair income, and [music] publishers are doing better than ever. Not a single [streaming] service has managed to reach profitability… certainly not Spotify.”
  • “All [streaming] services have struggled in large measures because of the enormous royalty rate for licenses. In Spotify’s case, those royalty payments constitute 70 percent of its revenue. For Spotify and other streaming services to have a viable business, they will need rate reductions, not increases.”

A couple of telling quotes, there, from Spotify’s attorney, John P. Mancini of Mayer Brown LLP, speaking in front of the Copyright Royalty Board (CRB) in March 2017, arguing why Spotify shouldn’t pay music publishers (and their songwriters) more money.

Spotify went on to lose this legal tussle with US music publishers – who were repped by the National Music Publishers’ Association – regarding improved rates for songwriter payouts from its service.

Yet SPOT still hasn’t given up its fight to pay songwriters less.

“Spotify is not making a fair income, and [music] publishers are doing better than ever… For Spotify [to] have a viable business, [it] will need rate reductions, not increases.”

John P. Mancini of Mayer Brown LLP, repping Spotify, in March 2017

In March last year, we learned that Spotify had clubbed together with Google, Amazon and SiriusXM/Pandora to appeal the CRB’s rate decision, which was set to bring songwriters and publishers a 44% pay rise from these services between 2018 and 2022.

That appeal is ongoing (it reached the Court of Appeals for the D.C. Circuit in March this year), but, for loss-making Spotify, it’s wrapped up in a key argument: there is only so much money, as a percentage of its revenue pie, that SPOT can pay out to artists, labels, songwriters and publishers, combined, while still running a functioning business.

If the CRB-mandated songwriter payout figure rises too high, suggests Spotify, it could threaten its very existence.


An obvious question, then: Does this argument really hold the same amount of water when Spotify is simultaneously spending hundreds of millions of dollars on podcasts?

Spotify has spent approximately $600m on podcast-related acquisitions in the past 18 months, including its buys of Anchor FM ($154m), Gimlet Media ($195m) and Parcast ($55m) last year, plus Bill Simmons’ sports podcast The Ringer (up to $196m) in Q1 2020.

The $100m Joe Rogan deal, which isn’t an acquisition but a licensing deal, reportedly takes this podcast spend up towards the three-quarters-of-a-billion dollar mark.

“Eventually we will get to more of a point of maturity where we’ll focus more on profit over growth, but for the next few years it’s going to be predominantly growth for us.”

Daniel Ek, Spotify, speaking in April 2020

Spotify founder Daniel Ek recently stated that SPOT has no plans to curb its M&A expenditure in the face of what he sees as a major opportunity to steal away traditional radio’s ad dollars with a podcast/music combination on Spotify.

Ek said last month: “We’re in the growth stage… Eventually we will get to a point of maturity where we’ll focus more on profit over growth, but for the next few years it’s going to be predominantly growth for us.”

That’s all very well (although, 12 years on from Spotify’s launch, that’s one lengthy “growth phase”). Yet at the same time, Spotify is telling the CRB that pay rises for songwriters are impossible, due to its status as a perpetually loss-making company.

According to Spotify’s annual report for 2019, it posted a €73m ($82m) operating loss last year. That’s less than the amount of cash it’s just committed to spending on Joe Rogan alone.

The logical next question: As Spotify attempts to deny songwriters a pay rise because it supposedly can’t turn a profit, are those same musicians actually subsidizing Spotify’s huge podcast acquisitions, and therefore its rapid market expansion?


2) record labels (and artists)

If you want to know all about how podcasts could destabilize the market share of record labels on Spotify’s service, this piece from December last year will fill you in.

The highlights: a recent surey from Edison Research showed that, in 2014, 80% of the US population’s listening hours were dedicated to music, with 20% going to spoken word.

Yet in 2019, largely thanks to the popular eruption of podcasts, music’s share had fallen to 76%, with spoken word growing to 24%.



In its Q1 2020 results, Spotify gave away some important updates to this narrative, with two key data points:

  • (i) 19% of Spotify’s total Monthly Active Users (MAUs) engaged with podcast content in Q1, which equates to 54m people (out of 286m total MAUs);
  • (ii) There are now more than a million podcasts available on Spotify, with SPOT’s fully-owned distributor, Anchor (cost: $154m), powering 60% of them.

The big worry for record labels here will be the potential volume of music track plays that these growing podcast habits on Spotify are now erasing.

For example, if those 54m people in Q1 each played an hour’s worth of podcasts in the quarter – and we say that songs are on average three minutes long – these podcast plays could have ‘blocked out’ 1.08 billion music plays. (This is obviously a hypothetical, where we assume, if these people didn’t have access to podcasts on Spotify, they would be instead playing songs.)

At Spotify’s approximate current $0.0035 per-stream recorded music payout rate, those 1.08bn hypothetical streams would have made the record industry in the region of $3.8m.

I remind you at this point that each Joe Rogan Experience podcast – and there are some 1,477 of them in the can, all presumably coming to Spotify on September 1 – lasts in the region of three hours.


Of course, Spotify doesn’t actually pay out ‘per stream’, as it were, instead paying an agreed net percentage of its revenue to labels and distributors (around 52% for the majors), allocated against their market share of plays.

How podcasts affect this payout calculation is thought to have been a serious sticking point in Spotify’s long-dragged-out renegotiation with Warner Music Group for the twosome’s recently-agreed global licensing deal.

The major record labels want a guaranteed minimum percentage of Spotify subscription revenues, regardless of how much music (versus podcasts) the platform’s subscribers actually consume. Spotify reportedly takes a different view, suggesting that if a subscriber listens to nothing but podcasts on its service, the labels shouldn’t get any money.


Adding to the intrigue: Goldman Sachs just published an update to its influential Music In The Air report, in which author Lisa Yang and others comment that they believe record labels (and artists) will be “the largest beneficiaries of the growth of music streaming given they receive 52%-58% royalty rates from the major DSPs”. Goldman Sachs adds: “[We] expect no major change to these rates in the near term given the competitive dynamics amongst the DSPs”.

To put it another way, with a 35% market share of global music subscribers today, Spotify isn’t dominant enough to try and reduce that 52% label rate any time soon (in Goldman’s view, any time over the next decade).

Yet what if Spotify reduced the majors’ payout via stealth, by giving them their 52% revenue share, just not of all audio plays on the service (i.e. not when it comes to podcasts, which are non-royalty paying)?

According to Spotify’s year-end filings, as recently noted by Midia Research’s Mark Mulligan, the combined market share of annual streams on SPOT cumulatively claimed by Universal, Sony and Warner, plus indie agency Merlin, is already falling.

“We’re not on Spotify, and the reason why we’re not on it is because it didn’t make any sense.”

Joe Rogan, speaking in 2018

These four parties claimed approximately 87% of streams on Spotify in 2017; they claimed approximately 85% in 2018; and they claimed approximately 82% in 2019.

So what happens if Spotify’s investment in podcasts, especially big-money flagships like The Joe Rogan Experience, now take this figure below 80%, or even below 70%, in future?

It will not be welcomed by the major labels – aka Spotify’s biggest customers. Ahoy, there, commercial tension!

Those same majors are unlikely to forget that, in February 2019, Daniel Ek told his investors: “We believe that, over time, more than 20% of all listening on Spotify will be non-music content, and we strongly believe that this opportunity starts with podcasts.”


The good news for Universal, Sony et al in the face of these issues? Daniel Ek and his team can clearly be pressured into paying out big checks by dominant market players who take no nonsense.

Joe Rogan knows this better than anyone.

He’s just inked a $100m-plus deal with Spotify for The Joe Rogan Experience, almost exactly two years after telling Aerosmith’s Steven Tyler (see below) on the very same show: “We’re not on Spotify, and the reason why we’re not on it is because it didn’t make any sense.

“They were like ‘We want to put you on it, it’s gonna be great for you!’ And I was like, how is it great?

“You guys are gonna make money. You guys are making money and you don’t give us any.”

And then they did. All nine figures of it.

Now that’s what you call negotiating in public.


Music Business Worldwide

Related Posts