The Tipping Point for Podcasting?
European Straits | Monday Note
Hi, it’s Nicolas from The Family. Here’s a Monday Note on Spotify’s deal with US comedian Joe Rogan, who’ll now be broadcasting his podcasts exclusively on Spotify.
A lot is happening in the world these days—we’re in the middle of a pandemic, after all! Yet last week, going through the many articles that ended up in my mailbox, I couldn’t help but notice that tech commentators were particularly enthusiastic about this piece of news:
Spotify has signed The Joe Rogan Experience, which previously wasn’t available on the platform, to a multi-year exclusive licensing deal. Which means that not only has Spotify finally made the last big holdout available on its platform, it’s also eventually going to become the exclusive home to what’s widely believed to be one on the biggest — if not the biggest — podcast in the business.
First off, I must admit I barely know who Joe Rogan is. The name is familiar to anyone who, like me, is interested in the podcast economy. But Joe Rogan, like baseball, is himself a very US-centric reference. Even for someone who’s as interested in the US as me and travels there several times a year (when there’s no pandemic), Rogan is simply not a household name in Europe. I wrote about this phenomenon in my issue about Anthony Bourdain last year:
We have this idea that there’s a single Western culture and that we admire the same personalities on both sides of the Atlantic. But there must be dozens, even hundreds of US individuals as charismatic and exceptional as Bourdain that we in Europe have never heard about. It tells a lot about the worrying divide between Europe and America.
Business-wise, my spontaneous reaction would be to refer to when Sony signed a mega-deal with Michael Jackson in 1991. Back then there was talk that maybe it was because they wanted to distribute his music exclusively on MiniDisc, the new storage format that Sony was planning to launch the following year and that some (not all) viewed as the successor to the CD. Clearly, that never happened (I mean, the MiniDisc did launch, but it failed miserably and Jackson’s lawyers would never have agreed to that kind of exclusivity anyway). The same pursuit of “convergence” (code for vertical integration of content production and its exclusive distribution) led to a dead end when Jean-Marie Messier’s Vivendi Universal tried to revive it 10 years later.
I don’t think this sort of scepticism is in order in the present case. First of all, many people might feel an attachment to the open podcast ecosystem (see below), but let me tell you the blunt truth: it’s a nightmare for everyone. Content producers have to manage distribution over dozens of channels, with the related difficulty of collecting data and connecting with their end users. Meanwhile, end users (like me and maybe you?) have a major discovery problem because podcasts are scattered all over the place, not least on platforms with a subpar design and user experience such as Apple’s iTunes. I simply don’t see how that can last. The CD was relatively convenient for its time, which is why the MiniDisc never got to replace it. There’s simply no equivalent in podcasting.
In addition, Spotify, unlike Sony in 1991, really needs the deal.Their core business is about streaming music, which is a perpetual money loser since every additional dollar they make will soon be claimed by ravenous rights holders at the top of the value chain.
For Spotify, podcasts are a better alternative, a lifeline even, because they can deal directly with the individual podcasters rather than with powerful record companies (which have no equivalent in podcasting). If Spotify is the platform that helps the most successful podcasters make a living, via either subscriptions or advertising, then they’ll have the market power to retain a significant proportion of the dollars generated.
The only problem is that they need something to kick it all off: a powerful signal to all podcasters that the real thing is happening on Spotify rather than Apple, SoundCloud, or any other platform. Hence the Joe Rogan deal, which could very well be the tipping point for the podcasting industry. If it is, Spotify will emerge as the dominant player down the value chain, followed by two steps:
Concentration, which in turn will provide Spotify with the necessary market power to crush the resistance of large legacy players up the value chain. The detour through podcasts could very well give Spotify the strength it needs to force record companies into submission.
Deconcentration, as the number of independent podcasters is likely to multiply again thanks to new platforms coming along, but this time with better data and monetization. We’ve seen this in publishing (after Facebook comes Substack) and retail (after Amazon comes Shopify).
For more background, make sure to have a look at Ben Thompson’s Spotify’s Podcast Aggregation Play (as well as the older Podcasts, Analytics, and Centralization). For thinking about the deformation of value chains, read my The Five Stage of Denial (2016). As for the Joe Rogan deal itself, here are the most interesting takes, whether enthusiastic or critical:
Joe Rogan Got Ripped Off (Andrew Wilkinson, Supercast)
Spotify's New Customer (Brett Bivens, Venture Desktop)
The open podcast ecosystem is dying — here's how to save it. (Nathan Baschez, Divinations)
On the Spotify-Joe Rogan Deal and the Coming Death of Independent Podcasting (Matt Stoller, BIG)—see also Will Spotify Ruin Podcasting?
Joe Rogan and Spotify, Luminary and Howard Stern, Apple’s Response (Ben Thompson, Stratechery)
😀 About how value is redistributed along the value chain in the content industry, make sure to read what Hamish McKenzie, a cofounder of Substack (through which this newsletter was sent to you), has to say in What's next for journalists?
🙂 Former hedge fund manager Marc Rubinstein, who blogs about investing on Degrees of Certainty, just launched a newsletter Net Interest. His first issue discusses the reasons why startups in financial services haven’t benefited from the current crisis as much as expected: Banks vs Fintech: A Coronastory.
😏 Yet another large player has announced that they were backing India’s Reliance Jio Platforms (KKR, following Facebook, Silver Lake, Vista Equity Partners, and General Atlantic). Here, I think, is everyone’s bet: Jio will become to India what Tencent is to China—the company that operates the local superapp.
😐 Another clash of titans within a value chain deformed by the crisis: Amazon vs. the likes of FedEx, UPS, and national postal services. More online sales means that Amazon commands a higher proportion of the latter’s revenue, which forces them to trim their margin. Here’s Brooke Sutherland in Bloomberg.
😒 The conversation is mounting about the shape of the economy when we finally recover from the COVID-19 crisis. There are worries about “ghosts” (companies that likely won't survive the reopening) and “zombies” (those that should have died a while ago but are still alive thanks to taxpayer money).
😖 Some countries have long had a clear strategy, and they’re using the COVID-19 crisis as an opportunity to advance it. The UK sees the pandemic as an opportunity to expedite Brexit without much negotiating, while China is clamping down on Hong Kong and hoping nobody is watching.
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From Normandy, France 🇫🇷
Nicolas
