By forcing Spotify Technology SA to pick between him and its most popular podcast, Canadian music icon Neil Young has revealed a long-simmering tension at the core of streaming music: Even for the biggest subscription audio platform in the world, it’s hard to make money from songs alone.
The musician delivered Spotify an ultimatum this week: stop giving a platform to The Joe Rogan Experience, which Mr. Young and hundreds of medical experts have said spreads false information that discourages uptake of COVID-19 vaccines, or remove Mr. Young’s catalogue – one of the world’s most popular, thanks to albums such as After the Gold Rush, Harvest and Rust Never Sleeps. Joni Mitchell, his fellow Canadian-born alumni of Los Angeles’s Laurel Canyon music scene, asked Spotify to do the same with her catalogue late Friday.
Spotify showed little hesitation in removing Mr. Young’s catalogue within a day of his request, prompting many subscribers to say they’re abandoning the platform. The conflict has brought to light the priorities of a company that was once hailed as the saviour of the music business.
“Podcasting is their big strategic bet, and Joe Rogan is the centrepiece of that strategy,” said Tatiana Cirisano, a music-industry analyst and consultant with Midia Research. The streaming company spent a reported US$100-million for exclusivity rights to Mr. Rogan’s show in 2020.
“Spotify can’t really afford to lose Joe Rogan or his audience,” Ms. Cirisano added.
Subscription-based audio streamers, including Spotify, have always struggled to make profits, in large part because of the costs of royalties owed to musicians. Meanwhile, musicians have been consistently outraged by the sizes of the royalties these platforms actually deliver, often arguing that their ability to make a living has been reduced compared to the golden age of physical media. The result is a platform that frustrates both the creators that fuel its content and the investors that fuel its growth. The company has also been caught in the recent tech sell-off, with shares tumbling to about US$173 each, from a high of over US$300 last year.
Faced with this double bind, Spotify has broadened its offerings to include podcasts, and it has increasingly framed itself as a platform for all types of audio since going public in 2018.
The Stockholm-based company has 381 million users, 172 million of whom pay subscription fees that usually amount to about $10 a month. The remainder use its ad-supported tier. Spotify has spent hundreds of millions of euros since its IPO acquiring media and podcast brands such as The Ringer and Gimlet, as well as technology companies to help it monetize podcast advertising. The buying spree has turned that side of its business into a cash cow, as the music side struggles to make income.
Podcast advertising is a growing and lucrative market. The Interactive Advertising Bureau of Canada found that digital audio-ad spending reached $96-million in 2020. And the research firm eMarketer reported last month that 2021 was the first year when Canadians spent more time listening to digital audio than to terrestrial radio.
Losing either Mr. Young or Mr. Rogan would have posed a reputational risk to Spotify, said Catherine Moore, an adjunct professor of music, technology and digital media at the University of Toronto. “But in terms of financial risk, that’s much higher if Joe Rogan leaves Spotify,” she said.
During the past two decades of music-industry upheaval, Mr. Young has rarely taken tough developments in stride. Despondent over digital music’s low sound quality, he spent years promoting a high-resolution audio player and download service called Pono – a since-abandoned project that earned both praise and mockery for its faith in musical purity in an era when it was difficult to get consumers to pay for anything related to music.
Mr. Young’s music has consistently had a progressive, fight-the-power bent, but his stance on vaccine misinformation may also have been directly influenced by his lived experience: He had polio as a child. In a since-deleted open letter this week, he asked his manager and label, Warner Records, to remove his music from Spotify because, he alleged, Mr. Rogan’s podcast is “spreading fake information about vaccines – potentially causing death to those who believe the disinformation being spread by them.”
Though Spotify told The Wall Street Journal that it has removed more than 20,000 podcast episodes related to the pandemic in the past two years, Mr. Rogan’s massive popularity and exclusivity deal present the company with both a user-retention problem and a free-speech one. Even World Health Organization director-general Tedros Adhanom Ghebreyesus said on Twitter Friday that he stood behind Mr. Young’s decision.
“Spotify is almost becoming a media outlet, in that the typical business model for a media outlet is that they fit between content and advertising,” Prof. Moore said.
Thousands of people said on social media this week that they would delete Spotify in favour of other services, such as Apple Music – which is widely understood to pay a higher royalty rate than Spotify – and Bandcamp, which has become a haven for independent musicians through its direct-download business model and routine revenue-sharing initiatives.
Many musicians need Spotify income to survive, especially as the pandemic has ravaged the concert business. Faced with this problem, some artists have said they stand with Mr. Young, but that they are unable to follow his lead. “It will take principled sacrifice by the bigger artists who can afford to take the hit for things to start improving for the rest of us,” the Polaris Music Prize-winning rapper and producer Cadence Weapon wrote on Twitter Wednesday.
Vish Khanna has interviewed hundreds of musicians for his long-running Kreative Kontrol podcast, and he decided this week to ask his distributor to remove the show from Spotify, which represents about 12 per cent of its listenership. “There’s been some anxiety in my life since making this decision,” he said in an interview.
The Edmonton podcaster has spent decades following the music industry. He said he had long been frustrated by the fact that he distributed his podcast on Spotify, a platform that he believes does not fairly pay musicians for their work.
Though he thinks other platforms are similarly unfair, Spotify has routinely irked artists. The company’s chief executive officer, Daniel Ek, once suggested in an interview that musicians who produce work through traditional album cycles need to work harder.
Mr. Khanna has historically shown his frustration in quiet, symbolic ways, such as by using a devil emoji next to Spotify links in social-media posts promoting his episodes. Now he’s choosing to be more explicit. “This is a stand I wanted to make,” he said. “I’m hopeful people will find the show in other ways.”
Representatives for Spotify, Mr. Young and Mr. Rogan did not respond to requests for comment.
Spotify has reported strong revenue growth in recent quarters, but solid profits have remained elusive even as its monthly active users reached 381 million as of the third quarter. The company in October reported revenue of nearly €7-billion for the nine months ended Sept. 30, but just €5-million of net income. It forecast fourth-quarter operating losses between €72-million and €152-million.
Mr. Young had about six million monthly listeners on Spotify, which he has said represented about 60 per cent of his streaming income. George Howard, an associate professor of music business and management at Boston’s Berklee College of Music, pointed out that Mr. Young has often left money on the table when opportunities have not aligned with his values, regularly choosing not to license his music for commercial use.
“If Neil Young wanted to do a cash grab, he could just license Rockin’ in the Free World to Pepsi,” said Prof. Howard, a long-time independent record label and distribution executive. Now the rest of the world is coming to understand Spotify on the same terms Mr. Young does, he continued.
“They’re not a music platform – they’re a wealth-transfer platform,” he said. “You can take the Milton Friedman viewpoint of increasing shareholder value, but there is a greater duty to society.”
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