Spotify (SPOT) shares were on the back foot again Monday after the music sharing platform found itself entangled another controversy involving podcast host Joe Rogan.
Spotify CEO Daniel Elk, who last week had to manage the impact of weaker-than-expected user growth linked in part to the fallout from the popular "Joe Rogan Experience" podcast, apologized to employees over the weekend after a video surfaced of Rogan using racial slurs on several occasions during his show over a twelve year span.
Rogan, who apologized for spreading vaccine misinformation on his podcast last week, also expressed regret for his use of the N-word, which was uncovered in an Instagram post by the singer-songwriter Inida.Arie.
“While I strongly condemn what Joe has said and I agree with his decision to remove past episodes from our platform, I realize some will want more,” Elk said in a letter to employees. "I want to make one point very clear: I do not believe that silencing Joe is the answer. We should have clear lines around content and take action when they are crossed, but canceling voices is a slippery slope.”
Spotify shares were marked 2% lower in early afternoon trading Monday to change hands at $171.03 each.
Last week, forecast softer-than-expected user growth that overshadowed a solid fourth quarter earnings report just as it grappled with the vaccine controversy surrounding Rogan's popular podcast.
Spotify said paid subscribers to it network would grow to 183 million in the current quarter, with revenues forecast in the region of €2.6 billion, but declined to offer guidance on annual growth rates, suggesting it could lose a trove listeners over the controversy as several artists, lead by Canadian singer-songwriter Neil Young, demanded the removal of their music from the platform.
Still, for the three months ending in December, Spotify had 180 million active users and a staggering 3.6 million podcasts on its platform.
"Management indicated its first quarter guidance does not reflect any churn from the Joe Rogan controversy but said it was too early to gauge its impact which usually takes months not days," said Credit Suisse analyst Douglas Mitchelson, who carries a 'neutral' rating with $238 price target on the stock.
"We do remain concerned regarding content costs, as music labels will remain difficult partners and we expect leading podcast talent to be pricey when renewing exclusive contracts in coming years, plus competition might restrain pricing power and platform monetization," he added.
