May 26, 2020

My One Worry About the Rogan/Spotify Deal

The big news these past couple of weeks appears to centered around podcasts and the major companies that are trying to control them. With Barstool and Call Her Daddy and now Spotify licensing Joe Rogan, podcasts are really all the talk.

For those that don’t know, The Wall Street Journal reported:

Joe Rogan is taking his podcast exclusively to Spotify Technology SA in a licensing deal worth more than $100 million, according to a person familiar with the matter.

His full library, dating back 11 years, is to hit the service Sept. 1, and become exclusive to Spotify after that, before the end of the year. His video podcasts, which will also appear on Spotify, will no longer be available on YouTube.

That’s a lot of money for a single podcast. But then again, if it does generate close to 200 million monthly downloads, that’s a monster of a product for Spotify to pick up.

It’s good news for Rogan; it’s fine news for his listeners; and it’s great news for Spotify, which now has plenty of inventory to start really pushing its more dynamic ad insertion product. More importantly, with people coming to Spotify to listen to the show, it’ll give the streaming company the user data required to sell higher quality ad campaigns.

That’s the real secret for Spotify and marketers worldwide… Podcasts suck for anything other than straight performance marketing. I know people like to say that podcasts are about brand and awareness. No. Podcasts are good for a single thing and that’s putting $1 in with the hope that you get $2 out.


Brand and awareness building require you to be putting your message in front of the right audience for your business. With podcasts, we have no idea if the people listening to our shows are the right people. We can anecdotally guess, of course. If I had a podcast for A Media Operator, would non-media people listen?

But when you get to the scale of Joe Rogan where people from all walks of life listen, you can’t offer any user data of substance. That also means you can’t do any sort of ad targeting or buy only a subset of the audience. It’s all or nothing.

When the podcast is on a platform like Spotify, though, suddenly you’ve got a centralized service that is collecting that data and can, in turn, give marketers the information they need to make better ad-buying decisions.

So, the deal makes sense to me.

I’m not about to sit here and make the argument that taking $100 million in guaranteed revenue plus the many more millions I’ll earn on top of that is a bad deal. I did not grow up rich. If anyone would like to license A Media Operator, it’s yours for $100 million. No questions asked.

I’m also not going to sit here and say that it was strategically the wrong decision as well. I’ve seen some people say that it’s a bad move because it limits the upside. If Spotify wants Rogan’s show, it’s because it believes it can make more money on his creative license. Instead, some might argue, he should offer a subscription to his podcast and earn far more.

Again, I’m not interested in having that debate. A $100 million licensing fee where I get to control my content and when the deal is up, I own 100% of the IP is an insane deal for basically anyone in the world that is not already sitting in the nine figures world. I’m not.

But… I do have one primary worry about this deal for Rogan. While it’s true that he owns all his content and all the IP once the three year deal is up, if he decides to leave Spotify, he needs to start from scratch in the various open podcast players.

For example, if you take a look at The Joe Rogan Experience on Apple Podcasts, it has a 4.7 star rating with 154,200 ratings. I would guess millions of people subscribe to his show and get an alert the second a new episode comes out. That is likely the same across all podcast players, which is how he’s able to generate so many monthly downloads.

By going exclusive with Spotify, he is going to lose all of those direct push notifications to people’s devices. If he leaves Spotify, he’ll have to relaunch those RSS feeds and rebuild those subscriptions.

I sometimes feel like a broken record, but the most important thing a publisher can do is own their audience. It’s why I love newsletters. If I decide I’m done with Substack, I can take my email list and leave.

For podcasts that get sucked into a closed ecosystem like Spotify, that’s not so much the case. Giving up those open distribution channels can be detrimental to other publishers that might never get a second licensing agreement.

At an event last September, when talking about the Facebook News Tab, Jon Steinberg, founder of Cheddar, said:

Always take the check. But you are never getting another check, so you either take the check and staff it in a way that you can do it and shut it down without hurting your people, or you figure out a way to make it self-sustainable.

Platforms will often provide cash to get you, but they often won’t pay to keep you. And with something like podcasts, which are so dependent on a variety of open platforms, going exclusive and behind a wall can reduce your ability to ultimately leave.

For someone like Rogan, that might not be a problem. His audience seeks him out. It’s likely that he would announce on the show that he’s leaving Spotify and that people will have to find him the old fashioned way.

But I want to use this as a potential cautionary tale for other people that see Spotify, a platform, as a possible opportunity for monetization. We’ve seen it time and time again where publishers get roped into exciting opportunities with major platforms, only to be disappointed in the end.

When you’re building your property on rented land, the land owner ultimately controls what can or can’t happen.

Is individual monetization really the new media model?

Ben Smith from The New York Times (a sentence I’m still getting used to writing) titled The New Model Media Star is Famous Only to You. In it, he wrote:

In the news business, journalists are carving out new paths on Substack, a newsletter service. Its most successful individual voices — like the China expert Bill Bishop and the liberal political writer Judd Legum — are earning well into six figures annually for sending regular newsletters to subscribers, though no individual has crossed the million-dollar mark, the company said.

Ms. Atkin, who is 11th on Substack’s ranking of paid newsletters and was more willing than Mr. Bishop or Mr. Legum to talk in detail about the business, said she was on track to gross $175,000 this year from more than 2,500 subscribers. Out of that, she’ll pay for health care, a research assistant and a 10 percent fee to Substack, among other costs.

It really is exciting to see how people are building their businesses using technology like Substack to directly monetize their relationship with readers.

But as with the rise of all new technology, it’s easy to see it as some existential threat to the way things are. Case in point?

It’s hard to imagine even the most successful writers, like Mr. Bishop and Ms. Atkin, posing a major threat to the titans of media anytime soon, especially as a few big institutions — whether in news or streaming video — dominate each market. But the two writers’ path to success points to the reality that the biggest threat to those institutions may come from their talented employees.

I got my start online in the mid-2000s launching more blogs than I care to admit. It has become such muscle memory, I can manually spin up a new instance of WordPress in 5 minutes (none of that cPanel auto-install).

The argument was that bloggers were the future, so who needed media companies anymore? Since then, some of those early bloggers have gone on to join major media companies and The New York Times is stronger and more powerful than it has ever been before.

Nevertheless, history certainly seems to have a way of repeating itself. It’s common for people to say, “but this time it’s different.” This time it is different.

The problem with blogging was it was built on the notion of scale. An individual could make a living if they only grew large enough to generate enough ad revenue. Some did; most didn’t. The bloggers that made the most money were the ones with topics like “how to make money blogging.”

Now we have the tools for direction monetization. Rather than relying on hundreds of thousands of views, I can now build an incredibly profitable niche newsletter with 1,000 paying subscribers. That changes the math considerably.

Can thousands of people each build a business with 1,000 paying subscribers? There are two answers to that.

  • Yes, they can, if there are thousands of niches that are each large enough to have thousands of potential readers.
  • No, they can’t, because at some point, we are going to hit serious subscription fatigue and that is going to wear people out.

That second point is worth touching on… My belief is that people will only ever have four media subscriptions:

  1. National news
  2. Local news
  3. Content for work
  4. Content for fun

Maybe in that fourth bucket, people are willing to spend more money and get multiple subscriptions. However, I believe there is going to be some fatigue and people are going to start getting choosier with their subscriptions.

When that happens, we’ll start seeing bundling take place. Two newsletters that are each struggling to hit that 1,000 person mark might merge together and now have a larger, combined audience between the two of them. More people might start signing up because they are able to get more bang for their buck. I only signed up for Divinations and Superorganizers because I was able to get both for less than the two separately.

The question with these sorts of discussions is if 1+1=3. If, by merging two newsletters together, you can generate more in sales because you’re combating subscription fatigue, that’s a better business.

While I don’t believe media companies are going anywhere, I do think that the dynamics are changing. Media companies are hopefully starting to recognize that the newsrooms and content creators are the people responsible for the growth of the business.

As Jarrod Dicker of The Washington Post likes to say, media companies are turning into talent companies. Having aligned incentives with the creators that produce what your audience wants to consume is how all parties can win.