Spotify bet big on Joe Rogan. It got more than it counted on

Spotify was already the king of music streaming. But to help propel the company into its next phase as an all-purpose audio juggernaut, and further challenge Apple and Google, it wanted a superstar podcaster, much as Howard Stern helped put satellite radio on the map in 2006. Spotify executives came to view Joe Rogan — a comedian and sports commentator whose no-holds-barred podcast, “The Joe Rogan Experience,” was already a monster hit on YouTube — as that transformative star.

In May 2020, after an intense courtship, Spotify announced a licensing agreement to host Rogan’s show exclusively. Although reported then to be worth more than $100 million, the true value of the deal that was negotiated at the time, which covered 3 1/2 years, was at least $200 million, with the possibility of more, according to two people familiar with the details of the transaction who spoke anonymously because they were not authorized to discuss it.

But in recent weeks, the show that helped Spotify catapult into a market leader for podcasts has also placed it at the center of the sort of cultural storm that has long engulfed Facebook, Twitter and YouTube, over questions about the responsibility tech behemoths have for the content on their platforms.

It began when several prominent artists, led by Neil Young, took their music off the service to protest what they described as COVID-19 vaccine misinformation on Rogan’s show. Then clips from old “Joe Rogan Experience” episodes caught fire on social media, showing him using a racial slur repeatedly and chuckling at jokes about sexual exploitation, prompting Rogan to apologize for his past use of the slur. A #DeleteSpotify social media campaign began calling for a boycott. And some Spotify podcasters publicly criticized Rogan and the platform.

Even in the frothy podcast market, the deal for “The Joe Rogan Experience” was extraordinary. Spotify had purchased entire content companies, Gimlet Media and The Ringer, for slightly less than $200 million each, according to company filings.

With tens of millions of listeners for its buzziest episodes, “The Joe Rogan Experience” is Spotify’s biggest podcast not only in the United States but in 92 other markets, with a following that hangs on every word of his hourslong shows. In its financial reports, Spotify cites podcasts — and Rogan’s show in particular — as a factor in the long-sought growth of its advertising business.

As Rogan faced growing public criticism, Spotify responded by reaffirming its commitment to free speech, even as dozens of Rogan’s past episodes have been removed. It also made its content guidelines public for the first time, said it would add “content advisory” notices to episodes discussing the coronavirus and promised to contribute $100 million for work by creators “from historically marginalized groups.”

The moves came as Spotify faced growing dissension among high-profile creators. This month, Ava DuVernay, a film director who announced a podcast deal with Spotify a year ago but has yet to produce any content under it, severed her ties with Spotify, according to a statement from her production company, Array. And Jemele Hill, a former ESPN commentator, said Spotify’s defense of Rogan had created problems with her audience and raised questions about the sincerity of the company’s dedication to minority talent.

“What I would like to see,” Hill said in an interview, “is for them to hand $100 million to somebody who is Black.”

For Spotify, the move into podcasting is the culmination of years of strategy to find a business that is more profitable than hosting music, for which it must pay about two-thirds of every dollar to rights holders.

The company dipped its toe into video around 2015, but little came of it. By 2018, the year Spotify listed its shares on the New York Stock Exchange, it was forming plans to pursue Rogan, hoping to supercharge its market position in nonmusic audio and to chip away at the dominance of Apple and Google’s YouTube.

To make Spotify a player in podcasting, Ek and his deputies, including Dawn Ostroff, a former television and magazine publishing executive, and Courtney Holt, formerly of Maker Studios, an online video network, set out on a multipart strategy. Spotify would buy audio studios, such as Gimlet, and acquire exclusive rights to existing shows. With Spotify Originals, the company would also create buzzy new programs in partnership with creators such as DuVernay’s Array and Higher Ground, the production company of former President Barack Obama and Michelle Obama.

“All music streaming services are offering the same plain vanilla ice cream at the same price,” said Will Page, Spotify’s former top economist, who was not involved in the Rogan deal but is a frequent commentator on the digital media business. “The overarching issue is how do you make your customer proposition distinct.”

The strategy had seemed to be working for Netflix, which produced its first original show in 2012 as a way to differentiate itself from other streaming services. Barry McCarthy, a former top executive at Netflix, was Spotify’s chief financial officer until early 2020 and is now on its board. (Earlier this month, he was named CEO of Peloton.) Ted Sarandos, co-CEO of Netflix, is also on the board.

Ultimately, the goal was to provide a pathway for different kinds of content to make its way onto the platform, as the company made clear when it announced that “audio — not just music — would be the future of Spotify.”

There was one podcast that executives felt could accelerate Spotify’s growth at the pace the company wanted: “The Joe Rogan Experience.”

Since the show’s debut in 2009, Rogan, a mixed martial arts enthusiast and comedian, had made himself into a podcasting heavyweight, landing an eclectic range of guests and engaging them in freewheeling, uncensored conversations.

The results could be wildly entertaining, as when Rogan smoked marijuana with Elon Musk, the billionaire founder of Tesla, in 2018. Or they could be inflammatory, as when Rogan hosted conspiracy theorist Alex Jones — who has spread bogus theories that the 2012 killing of 20 children and six educators at an elementary school in Newtown, Connecticut, was a hoax — despite Jones being barred from Spotify for violating its prohibition on hate speech two years prior.

Rogan’s show was one of the biggest success stories in podcasting, but for years it was not available on Spotify. In May 2020, Spotify wooed him with an offer he couldn’t refuse.

After the deal was made official, Rogan had a message on his show for fans who might fear more corporate control: “It will be the exact same show. I am not going to be an employee of Spotify.”

Spotify’s stock price jumped 17% the week the deal was announced.

For many rank-and-file employees at Spotify, landing Rogan was far from something to be celebrated.

He was already known for elevating controversial figures such as Jones and Gavin McInnes, founder of the alt-right group the Proud Boys. The news that Rogan would be joining the platform brought with it an initial wave of concern inside the company, according to several current and former employees.

That reached a flashpoint in September 2020, when a number of employees pushed back against episodes of Rogan’s show that they felt were transphobic. One employee group, Spectrum — made up of LGBT members or supporters — pressed management over why Spotify had made the deal with Rogan despite knowing how divisive some of his content could be, according to current and former employees who witnessed the events at the time.

There had also been concerns within Spotify that the company had not invested enough in moderation tools to review podcasts, an area known as “trust and safety.” The deluge of podcasts each week introduced new risks about harmful content that the company had not previously dealt with as a music service.

Ek defended the company’s decisions at the time, while meeting with many of the concerned employee groups to try to assuage their concerns. Management’s position, however, was clear: Rogan wasn’t going anywhere.

As the months wore on and Rogan showed no sign of shying away from controversy, more people connected to the company began to speak out against his presence on the platform.

In January, after 270 scientists, medical professionals and others wrote to Spotify to raise alarms about COVID-19-related misinformation on Rogan’s show, executives made assurances internally that the company was taking the issue seriously and that it was continuing to review Rogan’s shows to make sure they were complying with Spotify’s rules, said a person involved in the discussions.

The issue exploded Jan. 24, when Young, a rock icon, posted a public letter demanding that his music be removed from Spotify over coronavirus misinformation. “They can have Rogan or Young,” he wrote. “Not both.”

Amid the backlash, Rogan promised to add “balance” to the conversations on his show. But days later, the crisis widened when R&B singer India. Arie posted a video compilation of Rogan repeatedly using a racial slur, and said she wished to withdraw her music as well. She and other musicians also used the episode to reiterate long-running complaints that the streaming economy does not pay artists enough.

As the controversy swirled, many Spotify workers felt management was too slow to respond, two current employees said. It also raised alarms on Spotify’s board of directors, where some members have been disappointed by the company’s halting response, according to a person familiar with the events who asked to remain anonymous because of confidentiality agreements.

Management of the crisis in the United States may have been further complicated because Spotify’s headquarters is nearly 4,000 miles away, in Sweden, where Ek, a publicity-shy executive who grew up in a suburb of Stockholm, and many of the company’s engineers and longest-tenured employees are based.

Free expression is a deeply held belief in Sweden. Many employees there — and in the United States — were angry when Spotify removed music by R. Kelly and XXXTentacion from playlists in 2018 for content or conduct deemed offensive, a decision the company quickly reversed.

“We’re not in the business of dictating the discourse that these creators want to have on their shows,” he told employees earlier this month in a speech first reported by The Verge, adding that “if we only wanted to make content that we all like and agree with, we will need to eliminate religion, and politics, and comedy, and health, and environment, and education, the list goes on and on and on.”

And as a business matter, censoring Rogan could alienate his legion of fans and set a slippery precedent with other podcasters, according to Mark Mulligan, an industry analyst with Midia Research.

“That could put at risk their future podcast strategy,” Mulligan said.