Spotify responds to the Joe Rogan fiasco

This is an audio transcript of the FT News Briefing podcast episode: Spotify responds to the Joe Rogan fiasco

Marc Filippino
Good morning from the Financial Times. Today is Thursday, February 3rd, and this is your FT News Briefing.

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The European Central Bank meets today with record inflation, adding pressure on it to raise rates sooner. And Argentina’s debt to the International Monetary Fund is creating new political turmoil. But first, if the backlash against Joe Rogan wasn’t enough of a headache for Spotify, the music streaming company’s stock price tanked after yesterday’s earnings report. I’m Marc Filippino and here’s the news you need to start your day.

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Recently, several high-profile musicians announced they were pulling their music off Spotify. They include artists like Neil Young and India Arie, who have been protesting Spotify’s blockbuster podcast The Joe Rogan Experience. They accused it of spreading Covid misinformation. Rogan has apologised and Spotify has taken steps to contain the fallout. But is it really over? To talk more about it, I’ve got our US media correspondent Anna Nicolaou on the line.

Marc Filippino
Hi Anna.

Anna Nicolaou
Hi there.

Marc Filippino
So Anna, before I get to the Joe Rogan stuff, Spotify’s share price dropped as much as 23 per cent at one point in after-hours trading yesterday. This is despite the company reporting that their fourth-quarter revenue rose 24 per cent from the same period a year ago. Why did we see such a sell-off?

Anna Nicolaou
Yeah, so the actual results were quite positive, but I think going into this, a lot of people were looking pretty carefully at their forecasts for this current quarter, just given all of the backlash and the controversy that’s going on in the past week or so, and people threatening to delete Spotify and all that. It would be this quarter when that actually would have appeared. And so for this quarter, Spotify predicts it will have three million subscribers, compared to eight million last quarter. So I think there was this kind of knee-jerk reaction like, oh, well, Spotify is actually in trouble.

Marc Filippino
Yeah. And then on the earnings call yesterday, someone actually asked point blank if the Joe Rogan drama would affect Spotify’s business. What did Spotify say?

Anna Nicolaou
Effectively, they just said, we don’t know, which I guess was kind of refreshingly honest. The chief executive, Daniel Ek, said it’s too early to tell if there’s going to be an impact in terms of people cancelling and looking for other services. The thing that they said that wasn’t particularly encouraging was that their weaker forecast for this quarter did not include any potential impact from the Joe Rogan thing.

Marc Filippino
So one of the ways that Spotify has responded to this is by putting content warnings on anything that has Covid information or anything that may have Covid misinformation. Is that enough to stop the bleeding?

Anna Nicolaou
I think it really depends who you ask. I mean, there were 200-something doctors and other professionals that had called on Spotify to just kind of do something in terms of, you know, moderating what’s on their platform. From what I’ve been told, Neil Young and others, I don’t think anyone was looking for them to outright ditch Joe Rogan. I think that they were looking for fact-checking and things like that. It’s not clear, though. I mean, I think we’re still kind of in the middle of this story. We don’t know yet if these artists will come back and the whole thing will blow over or if it’ll kind of continue to snowball. The steps they’ve taken, I would say, are decent. I think a lot of people think that this should have happened a long time ago.

Marc Filippino
So Anna, considering how much money Spotify has invested in Joe Rogan, would they actually cut ties with him?

Anna Nicolaou
I don’t see it happening just because they need him. But I mean, I think the only way it could get to that point would be, you know, if tons of really big artists pulled their music from Spotify. I think short of that, it seems extremely unlikely they’ll do anything beyond what they’ve done already. That’s what Daniel Ek said yesterday. He called it very dramatic actions they’ve taken. And it does not sound like he’s willing to do anything beyond that

Marc Filippino
Anna Nicolaou is the FT’s US media correspondent. Thanks, Anna.

Anna Nicolaou
Thanks, Marc.

Marc Filippino
Just a heads-up that Spotify wasn’t the only tech company to have an ugly quarterly report. Shares in Facebook owner Meta dropped more than 20 per cent in after-hours trading yesterday. It came after the company said its first quarter revenue expectations will miss Wall Street’s forecasts by up to about $3 billion. Meta blames increasing competition.

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The European Central Bank meets today, and the big question is, will they raise rates earlier than next year? Now, the ECB has been slower to indicate that they will raise rates than, say, the Federal Reserve and other central banks. Brazil’s central bank said yesterday they were going to raise rates, but new eurozone inflation numbers came out on Wednesday at a record 5.1 per cent. Here’s the FT’s Frankfurt bureau chief Martin Arnold on how that might factor into the ECB’s thinking.

Martin Arnold
The signs that I get are that they will stick to their guns for now, and it’ll be quite a slow and steady shift in their policy stance over the next few months if they are to raise rates this year, it’ll probably be towards the fourth quarter.

Marc Filippino
Now, Martin, we should mention that the ECB’s interest rate is below zero. It is negative and it has been for a while. Why is the ECB taking such a cautious approach to raising rates?

Martin Arnold
Well, they believe that inflation is weaker in Europe than it is in the US. And one way to look at that is if you strip out energy prices and also food and other volatile prices, then inflation in the eurozone is only just above its 2 per cent target, whereas in the US it’s much higher. The other thing to bear in mind is that for many years, the ECB has been overestimating where inflation would end up, and inflation has actually been falling well short of its target. It’s been struggling to get inflation up to its target. So now inflation has finally gone above its target. It’s a little bit cautious to slam on the brakes and start raising rates aggressively because the risk is that it then falls back into the pre-crisis trend of stubbornly low inflation, which is a problem just as excessively high inflation is.

Marc Filippino
That’s the FT’s Frankfurt bureau chief Martin Arnold.

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Argentina is in a political crisis after a pivotal lawmaker quit this week. Maximo Kirchner was unhappy with the government’s plan to restructure $45 billion in debt owed to the International Monetary Fund. Kirchner was leader of the Peronist bloc in the country’s lower house of Congress. Here’s our Latin America editor Michael Stott, with more on Kirchner and the debt deal.

Michael Stott
He’s part of the hard line of the Peronist group, who believe that the original loan from the IMF should never have been made. It was something that broke the fund’s own statutes because it financed capital flight, that it was done for electoral reasons to fund the previous president’s election campaign and that therefore the IMF shouldn’t be repaid in full. And that’s really why he’s fundamentally opposed to. The IMF, it goes without saying, rejects those allegations.

Marc Filippino
Now Michael, Maximo Kirchner also happens to be related to the country’s powerful vice-president, Cristina Fernández de Kirchner, right?

Michael Stott
That’s right. Yeah, he’s her son and the scion of this political dynasty. His father was also a past president, so he has a lot of clout within the radical wing of the Peronist party.

Marc Filippino
So what does this mean for President Alberto Fernández? No relation to Cristina. Can the deal that he signed hold in the face of this kind of opposition?

Michael Stott
Well, that’s just the big question, Marc. I mean, he’s been clearly very severely weakened by it. It’s not clear whether he’ll be able to muster the support he needs in congress to get this passed. And the opposition actually now have come out and made life a little more difficult for him by saying that unless the government party is prepared to vote for this unanimously, the opposition are not prepared to follow suit and the opposition would, in that case, ask the law be struck out, which says that congress has to authorise a debt deal because of course, the opposition want the political cost of this deal to fall entirely on the government and not on them.

Marc Filippino
So what does it mean for Argentina’s economy if the deal collapses?

Michael Stott
Yes, it would be very serious, Marc. It would be a default on the IMF. So the situation is that Argentina is running out of money, it’s running out of foreign exchange. The net reserves now, the ones that are actually accessible to the government are very, very low. And the government has to make payments to the IMF of 2.8 billion by March and this year a total of 19 billion. And it simply doesn’t have the money. So unless it can restructure this debt with the fund, it will have to go into default with the fund.

Marc Filippino
So what happens next, Michael? What are you looking out for?

Michael Stott
Well, I think we’re watching whether the Peronists can muster enough agreement internally to get a deal through. They haven’t finished negotiating with the IMF, so last Friday’s agreement was an outline agreement and there’s still some important gaps in it. So there’s a big question about whether the government has got the stature and the authority to conclude an agreement and get its own party to back it. And at the same time, of course, markets in Argentina are very nervous. The parallel dollar, that’s the sort of black market dollar, is running at almost double the value of the officially controlled dollar, which is a sign of just how nervous markets are. So there’s also the risk of a market crisis. So that’s something we’re keeping a close eye on, too.

Marc Filippino
Michael Stott is the FT’s Latin America editor.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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