Spotify’s Daniel Ek addressed questions from investors and reporters in a Q&A session following the release of the company’s fourth-quarter earnings, which showed an increase of 8 million paying subscribers but middling financial results — but reflected a period before the firestorm of controversy around Neil Young and other musicians’ requests to remove their music from the service in response to anti-vaccine comments made on Joe Rogan’s Spotify-hosted podcast.
The earnings report contributed to a significant immediate drop in the company’s stock price in after-hours trading, even as Ek spoke to investors on a livestreamed Q&A. In after-hours trading after reporting Q4 results, Spotify’s stock — which historically has been highly volatile — fell as much as 22%. As of 5:35 p.m. ET, shares were trading down 11%.
He addressed the controversy briefly, referring to his statement on Sunday that the company will institute warnings on podcasts that address Covid-19, at the beginning of his remarks.
“Obviously, it’s been a few notable days here at Spotify,” he said. “When we entered into the podcast space in 2019 with the intent to help modernize and grow the space for all types of creators, we assumed they will test and challenge our teams in new ways. And there’s no doubt that the last several weeks have presented a number of learning opportunities. I hope you had a chance to read our response that address many of the questions received from creators and partners and employees and the medical and science communities. There’s still work to be done, but I’m pleased that Spotify is already implementing several first of its kind measure to help combat misinformation and provide greater transparency.
“We believe we have a critical role to play in supporting creator expression while balancing it with the safety of our users, and we will continue to partner with experts. Moving on to our results…”
He picked up the topic again in response to the first question, which addressed Rogan, in the Q&A session.
“I know this issue has been top of mind this week, but I think it’s important to take a step back,” he said. “We’re trying to balance creator expression with the safety of our users.
“Of course this is a very complicated issue, as I noted in my opening. But I’m really proud of the steps we took following the concerns raised by the medical and scientific communities. And it’s worth noting that both the content advisories on our platform, [combined with] content from physician and health experts which I talked about in my posts as well, push policies for creators that are already [beginning] to roll out.
“So I think the important part here is that we don’t change our policies based on one creator, nor do we change it based on any media cycle or call from anyone else. Our policies have been carefully written with the input from numbers of internal and external experts in this space. And I do believe they’re right for our platform. And while Joe [Rogan] has a massive audience, and is actually the No. 1 podcast in more than 90 markets, he also has to abide by those policies. So I think when you think about that and you think about the ad business, I have a tremendous amount of confidence.”
Ek said it was “too early” to determine how big an impact the Rogan controversy would have on subscriber cancellations, telling analysts that the effect of past controversies has played out over “months, not days.”
Spotify’s market capitalization fell about $2.1 billion over a three-day span last week after Young pulled his songs from the audio-streaming giant. However, it quickly recovered on Monday — not after co-founder/CEO Daniel Ek announced on Sunday that the company would institute warnings and links to health information on podcasts that talked about Covid-19, but rather after Rogan himself posted a 10-minute video in which he agreed with Spotify’s new policies and would work to bring people on his show with broader perspectives.
Spotify’s stock price was already on the slide — having plummeted 25% year-to-date as of Jan. 25, the day before Young’s catalog was pulled off Spotify. Investors have been rattled by signals that Spotify’s growth may be slowing, particularly after Netflix’s warning of a significant cooldown in first-quarter subscriber net adds (which precipitated a 24% drop in its share price).