Why Spotify Stock Has Tumbled This Week

What happened

As of Friday afternoon, shares of Spotify (NYSE: SPOT) had tumbled about 12% from where they closed last week.

While the S&P 500 and the Dow Jones Industrial Average were also down for the week, the streaming service was also embroiled in a controversy over its biggest podcast star, Joe Rogan, who is increasingly accused of spreading misinformation about COVID-19 and its treatment.

Some people are lining up in favor of Spotify censoring him, most recently musician Neil Young, who issued an ultimatum to the streaming service that it either remove Rogan or stop playing his music. Spotify removed Young's songs from the air.

A microphone with On Air sign on wall nearby.

Image source: Getty Images.

So what

The latest imbroglio began after Rogan hosted Dr. Robert Malone, who discussed "mass formation psychosis" -- essentially a form of mass hysteria in relation of COVID-19 -- and the episode was immediately branded as misinformation.

Weeks later, Young posted a since-deleted letter to his website that he wrote to his agent demanding Spotify choose between his music and Rogan. According to media reports, Young wrote: "I want you to let Spotify know immediately TODAY that I want all my music off their platform. They can have Rogan or Young. Not both."

Spotify complied with his request and removed his music. It was not hard to see who they would side with. Rogan reportedly attracts 11 million users per episode; Young brings in around 6 million users per month.

Numerous pundits, politicians, and fellow musicians have sided with Young and called for Rogan to be taken off the air. Spotify has so far ignored their demands, but the controversy seems to be weighing on its shares.

Now what

Spotify paid Rogan $100 million in 2020 to bring his brand to the streaming service, so it seems unlikely it would be willing to jeopardize that investment, especially with the massive audience the podcaster brings with him.

Rogan has become one of the biggest, most influential voices in media, and undoubtedly Spotify understood that controversies would erupt from time to time. Still, it does create risk for investors that a lot of the streamer's fortunes are also closely entwined with one high-profile celebrity.

Even so, podcasts are only continuing to grow in popularity and with the biggest name in the industry, Spotify is still the global audio leader.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns and recommends Spotify Technology. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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