Spotify has entered into a new multi-year megabucks deal with its biggest and most controversial podcast partner Joe Rogan.
The Wall Street Journal estimates that the deal could be worth up to $250 million, which Spotify denies. However, whatever the actual figure, throwing stacks of cash at Rogan at the same time as laying off significant numbers of employees and stopping payments to millions of grassroots artists isn't that good a look, especially when his podcast won't even be a Spotify exclusive anymore.
Despite cutting back its in-house podcasting operations over the last year - and ending various other exclusivity deals that it had with prominent podcasters - Spotify said in a blog post on Friday, "today we announced our new multiyear partnership deal with Joe Rogan Experience".
It then bragged further that "JRE remains podcasting’s king, consistently ranking as the most-listened-to podcast globally and our users have ranked the show as Spotify’s Wrapped top podcast each year since 2020".
According to the WSJ, the multi-year deal with Rogan includes an upfront minimum guarantee and a revenue share agreement, which will see the presenter earn a cut of any advertising income the streaming firm sells alongside this podcast.
Spotify announced its original deal with Rogan in 2020. At the time the streaming firm was pushing into podcasting in a major way and was therefore willing to spend huge sums of money to secure an exclusivity deal with the world's most successful podcast.
Some in the music community - especially those generally critical of what artists earn from streaming - were scathing of Spotify handing so much money to a single podcaster. Further criticism followed in 2022, though less about what Rogan earns and more about the content of his programmes.
That said, Rogan arguably is, as Spotify says, the podcasting king, and the company likely sees its ongoing partnership with him as a solid statement that - despite the cutbacks to its in-house podcasting division - as a company it remains fully committed to audio beyond music. This is crucial given how much money it has invested in podcasting and audiobooks in recent years.
It needs to reassure its content partners and, crucially, its investors, that those investments have not been wasted and that the opportunities it has touted in podcasts and books can still be realised. A dramatic departure from Rogan - especially if he signed up with a rival - could have impacted investor confidence, and the cost of the new deal may well be worth it just to stop that from happening.
Spotify's bold and expensive strategy to become a major player in podcasting did work in terms of it securing significant listener share. However, it is yet to turn podcasts into a major earner, financially speaking. Under increased pressure from investors to become a profitable company, that needs to change. To do that Spotify really needs to grow its advertising business, which continues to bring in significantly less revenue than subscription sales.
That need to bring in more advertising money is possibly why, under the new deal, JRE will return to other podcast platforms. The priority is no longer using podcasts to get people to sign up to Spotify, instead it simply needs to secure big brand deals. And in that domain, the wider the reach of Rogan's podcast the better.
Spotify has made wide-ranging cutbacks in recent months in its bid to become a profitable company. It has also changed its payment model for music, so that tracks that get less than 1000 streams a year will not be allocated any money.
However, that doesn't actually help Spotify financially, with other artists and labels - especially the majors - getting the benefit. For Spotify, signing up more subscribers, slowly increasing subscription prices and selling lots more advertising is the aim.
It remains to be seen if the second big Rogan deal - and indeed Spotify's entire push into podcasting - will truly pay off.