Spotify’s Stocks Reportedly Drop After Joe Rogan Controversy

by TK Sanders

Spotify warned Wall Street to expect lower-than-expected subscriber growth, causing a significant drop in stock price Wednesday’s late session. Executives made sure to emphasize that the lull was normal and not related to the current controversy surrounding Spotify’s flagship podcast, The Joe Rogan Experience.

The company’s shares dropped nearly 20 percent on the news, but buyers quickly pared the losses back to single digits. Spotify CFO Paul Vogel said this year’s growth rate would not be that much different than last in terms of users and subscribers.

“While we have not given full year guidance anymore on subscribers … we don’t expect a material difference in the net additions for either users or subscribers in 2022 relative to 2021,” Vogel said.

Although the growth guidance caused a quick sell-off, Spotify’s Q4 revenue was actually up above analyst’s estimates. The streaming site said they sold more advertisements in the podcast sector than forecast, while also growing premium subscriber service by 16 percent. Total active monthly users for the service also eclipsed 406 million — more than the entire U.S. population.

Spotify should also meet revenue estimates of 2.6 billion euros, according to their finance team. However, the company announced that they would no longer offer guidance about annual subscriber growth. For many technology companies which rely on subscribers, their stock prices live and die by growth projections, not revenue. Spotify’s decision to withhold the information from Wall Street will be interesting to watch unfold.

“Investors are clearly disappointed in the first-quarter gross margin trajectory. But, the real story is ad revenue growing at nearly double the rate of their subscription business. That’s where we believe the meaningful upside is over the course of the next several years,” said Rich Greenfield, an analyst at investment firm LightShed Partners.

Spotify’s massive acquisition spending makes them a target

The subscription music streaming service has made a huge splash in the media business of late. They invested over $1 billion in the podcasting business, led by marquee shows such as The Joe Rogan Experience and the Bill Simmons Podcast.

Rogan recently aired opinions about COVID-19 that the mainstream medical industry apparently does not share. However, Rogan does interview many legitimate doctors on his podcast. As a result, many outspoken critics of all dissenting COVID opinion began calling for the removal of Rogan’s podcast from Spotify. When the company refused, artists like Neil Young and Joni Mitchell pulled their songs from the catalog.

Rogan promised to provide a well-rounded point of view to all of his episodes.

Chief Executive Officer Daniel Ek said Spotify already employs a “sizable” content moderation team.

“We have taken action on more than 20,000 podcasts since the start of the pandemic,” Ek said in an interview. “So that tells you something about the scale of this operation. It’s truly a global operation.”

Spotify originally ventured into the podcast business in 2018 to compete with Apple and other big tech content platforms.