The Volatile Business of Content

Joe Rogan’s $100M Spotify Deal, Barstool Sport’s Call Her Daddy IP Battle, and the Future of Podcasting — 5.26.20 Archives Issue 20

This week has been an interesting week in the world of content. Let’s take a more focused look into the business of podcasts. Joe Rogan made a reported $100M deal with Spotify, and Barstool Sports has been thrown into Intellectual Property Rights Battle/Cat Fight with one of their leading media assets, the Call Her Daddy podcast.

We’re not going to step into the drama, because we don’t cover tabloid level news but here are the finer business points of the fiasco:

· Barstool’s President Dave Portnoy saw potential in the two podcast hosts, Alexandra Cooper and Sofia Franklin.

· Barstool then made an agreement with them to allow the women to leverage Barstool’s resources, massive audience, and presence among young people in exchange for the intellectual property rights of the brand.

· The women got a massive platform and Barstool took the brand. The podcast becomes an almost overnight success — with Barstool climbing to the top charts in a matter of months.

· Fast forward 2 years later to now, one of the hosts begins a relationship with an executive from HBO. He begins advising the women on exploring their options outside of Barstool Sports, and lines up a deal with the girls and Wondery, an open platform for storytellers and content creators.

The bottom line is this is going to be a continuing trend that we will see, whether it’s Joe Rogan making an exclusive podcast deal with Spotify or podcast hosts like Franklyn and Cooper changing platforms and labels.

The podcast business is going to become exceptionally unique in this way. You have a few major content platforms with different business models all seeking to keep their users retained through original content and attract new users with exclusive content deals. YouTube may have to ultimately take a new approach to further diversify into cross monetization and relax its censorship on creators to prevent more influencers from leaving to other platforms out of frustration from getting de-monetized on certain content topics.

This is a blow to both Apple and YouTube’s Parent Company Alphabet. On YouTube, The Joe Rogan Experience has over 9M subscribers, and it’s videos averaged between 2–3M views. While the podcast has also over 190M downloads every month across other platforms such as Apple’s podcast marketplace.

Spotify has seen over $5B added to its market cap since the announcement. This is arguably Spotify’s Howard Stern Moment.

Podcasting is arguably one of the best mediums of content creation that allows talent and influencers to essentially completely own their own IP. Influencer branded mini-series video content will also likely follow this trend.

What makes this different than television networks, movie studios, and originals content created by streaming giants, is that these mediums of content don’t require a large amount of capital invested and it primarily revolves around the talent and is completely interchangeable across platforms.

Joe Rogan can sign a 2-year agreement with Spotify, and then sign a 2-year deal with Apple after the contract expires. The Call Her Daddy Hosts can finish their contract with Barstool and then move their show to Wondery — then should they get bored of that, they can take their ball (brand & IP) and go somewhere else.

For organizations like Barstool that took the capital risk and essentially seed these new podcasts, they can begin structuring their deals as such that the content creators own their own brand, because they are the brand due to the cult of personality involved in the success of these media assets, but Barstool could be entitled to royalties in perpetuity for the risk they took and the support they provided — and they should be.

The Office is one of the most successful franchises in television history. It is the brainchild of Ricky Gervais. When the franchise changed hands between networks, Gervais still received royalties because it was his idea and his intellectual property, as did the network that backed him. The situations aren’t exactly comparable, because of that element of cult of personality that contributes to the success of these podcast franchises.

Influencer media asset followings have movable audiences that will go to other platforms because of the movement of influencers. This will be much more fragmented than television and movies because content creators hold more leverage from the audiences they have created across open non-gated platforms and social media.

Spotify will continue to behave more like Netflix in exclusive content deals with talent, and other podcast platforms will continue to court talent to lure them off of free platforms in hopes they grow their paid audiences and retain them, even if and after exclusive content deals expire.

Connie Chan, a General Partner at Andreessen Horowitz, said in a 2018 keynote the podcasting market size in 2017 in China was between $3B-$5B, and the market size in the US was only $314M. This is partially a result of the way tech platforms are structured in China, as well as a consequence of diversified monetization models.

While a recent 2020 report by Deloitte put the 2019 global podcasting market size at $1.1B, which seems far off from Andreessen Horowitz’s 2017 market sizing — unless they are only sizing the market by a segmented revenue metric.

The one conclusive consensus among the “thought leaders” is the market is growing, and it’s growing by hundreds of millions of dollars per year.

Chan’s keynote also proposed that because of the business models being either transaction-driven or advertising-driven in US tech and media companies, that the business models are perhaps negatively influencing their product thinking.

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