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Joe Rogan Spotify Deal Economics

Roger Faxon
Former CEO at EMI Group & Board Member at Pandora Media

Learning outcomes

  • Potential structure of the JRE deal and risks to Spotify
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Executive Bio

Roger Faxon

Former CEO at EMI Group & Board Member at Pandora Media

Roger has over 30 years experience in the music and publishing industry. In 1994, he joined EMI, one of the four largest record labels globally, and spent 5 years as CEO of EMI from 2007-12 just as the industry was rapidly shifting digitally. Roger has led A&R investments, negotiated deals with the largest streaming platforms, and is on the board of Pandora Media and ITV. Previously to working in the music industry, he was CEO of Sotheby’s Europe and EVP at Lucasfilm.Read more

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Interview Transcript

How much would you pay for Joe? Just looking at the downloads, 2.2 billion downloads, at $30 average CPM for podcasts, for one ad and I think he reads a couple of ads, at least, an episode, you can easily get into the hundreds of millions.

If you think about this, I was doing a little bit of work before this, to see whether I could get some data, the overall revenue that exists, across all platforms, for podcasts – and Howard wouldn’t be in that; that’s a different thing – is a billion dollars. That’s the entire marketplace, which is highly fragmented. If you think about US radio, which is the other place that you hear these things, that’s an $18 billion business. Where you are here, is in a world where this is a play for a longer term. It may be the start for Spotify, which is we want to play against terrestrial radio. We want to draw the value out of terrestrial radio. This is certainly what we were doing, at Pandora. That was the plan. That was what we were doing on the audio side and it was one of the reasons that we were building a podcast business.

It could well be that that is where Spotify wants to go, to build out a more rounded way of interrelating with their listeners.

They’ve got the new ad-insertion technology for dynamic ads, as well?

Right. Let’s just go back to that. It’s always been surprising to me that they haven’t been as aggressive in their freemium world, in developing tech and they are clearly doing that now. Anecdotally, it was because they believed that the whole business was about subscription and that that’s where they should put all of their efforts. I think what they’re doing now, and have been for the last year or so, which is building out a proper ad platform, is exactly what makes sense.

That’s the other thing that I find pretty interesting, and I think Daniel Ek mentions this a few times, where the ear is under monetized, relative to the eyes and the size of the music industry, versus the box office, etc. Nobody pays for podcasts and so it’s interesting to see how Spotify is moving more into content and exclusives and also has this option where you can see how much premium subscriptions Joe can drive, but also more likely, it’s going to drive more ad revenue, with this new technology.

Yes. If you’re thinking about what the economics are, for Joe, and I know Joe, he’s probably looking at numbers of listeners and having value attached to that, because if you go on the subscription models, those are without ads, there’s no incremental revenue, but there has to be incremental revenue to him. My suspicion is that the ad revenue will do what we were doing at Pandora which is, it essentially sits and is adjacent to the subscription. You have it if you have the subscription and you’re going to have to listen to ads. That’s why it’s impossible to understand what the structure of the arrangement is. It will become clear, over time. At the moment, there are real questions, in my mind, as to how they are structuring it. They were pretty cagey about, it’s $100 million, yes, but when, how, how do you get it back, how do you make money on it? None of those things are answered.

I fully expect that there are clear answers to all those questions and that there is a broader strategy than just, let’s get a big name and put it on our podcasts. I think there’s a much bigger strategy around what they’re doing and how they’re going to do it. We can talk, at some point in the future, when that becomes clearer.

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