Regardless of which podcasts you enjoy listening to, you should have heard about the Joe Rogan situation by now.

The Rogan-related Spotify saga has been burning hot enough now that it’s worth taking a moment to sit back, consider the big picture, and try to piece together the economic forces behind the hoopla. This morning, let’s talk about platforms, publishers, market reactions, and how people who vote with your agency are not the same as the Chinese Communist Party.

Understanding the Spotify Mess

Spotify was one of the early movers in the music streaming business and has done very well. I say this as a long-time Spotify user, fan, and general believer in music streaming. I happen to think access to streaming music is undervalued, in part because Apple can hold a price cap because of its hardware-generated wealth, but that’s a different matter.

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Music streaming is a commodity business. This means that many platforms offer mainly the same music and charge a more or less similar price. This is a tricky situation for artists as they are torn between not offering their music where fans have congregated (streaming services) and accepting prices many consider too low for their art (Spotify streaming fees). Fair enough.

Spotify has a different problem that stems from the same roots: Because music is traded, it has minimal price leverage. That is, you can’t charge $15 a month for the same thing that Apple charges $10 a month.

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This means that Spotify’s economics are largely fixed and that price changes can’t have much of an impact on its gross margins. This limits its profitability, which is not good. So the company embarked on an investment spree in the podcast world, buying startups and shows in hopes of owning enough unique material on time that you could perhaps charge more for your service, thus improving the quality of your income and the general economic profile.

This is my reading of the situation, but I don’t think I’m wrong.

As part of this podcasting push, Spotify spent a huge amount of money to bring the Joe Rogan podcast to its platform in what the company called a “exclusive partnership.” The mountain of money Spotify spent on this was a gamble, part of its broader podcasting strategy, and it was an editorial choice by the platform company.

That last point is important, because Spotify hosts almost all music without exerting editorial control. singer chris brown, who assaulted rihanna, is still on Spotify and Apple Music, as a data point. But Spotify invested a lot of its own money to get Rogan as an exclusive option, as opposed to just streaming the same stack of songs as other competing platforms.

Rogan’s popular show has had a number of guests that many people in the Spotify community, both customers and content providers, found objectionable. This latter field made headlines when some musicians decided that they would remove their melodies from the platformin light of Spotify buying podcasting content they vehemently disagreed with for public health reasons: We’re still in a pandemic today, keep in mind.

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This put Spotify in a bind. The company wants to have a commercial music business and an exclusive podcasting business. But instead, its podcast-only strategy was undermining its core value proposition and revenue driver, namely offering most recorded music for a regular fee.

Sure, losing Neil Young and a few others wouldn’t constitute a platform-breaking amount of lost music, but if the trend continues, Spotify could be left a bit depopulated of music, sending its subscribers elsewhere. Apple Music, for example. Spotify needed to calm the waters, because if it lost the music, no Rogan fan would be able to pull out the math pencil: the company is still a streaming music service with a podcast business, not the other way around.

then the company published your existing content rules, and said he would add a note to podcasts that discussed COVID-19. and joe pray made an instagram video discussing the situation. In classic Rogan fashion, she made an affable clip that digressed into his life, but said he would try to get more views to balance out his more controversial guests.

Towards the end of his clip, he added the following after thanking Spotify and his fans: “Thank you haters, because it’s nice to have some haters, it makes you re-evaluate what you want.” [are] do, and put things perceptively, and I think that’s good too.”

agreed. The market is a pretty good thing, with individual players being able to make decisions with their assets (music) and custom (where they choose to subscribe to streaming music). And when the market disagrees with one corporate option or another, individual players can help steer things. That’s, well, how capitalism works.

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And yet.

the sheer irony

And yet David Sacks.

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