The Obamas are splitting up… with Spotify

Speaker 1: [00:00:32] From Equity Mates media. This is the dive. I'm your host, Sascha kelly. For a while there was a joke in hollywood. 

Audio clip: [00:00:40] Netflix, your green lit. Who am I speaking with? 

Sascha: [00:00:42] Netflix will greenlight anything. 

Speaker 1: [00:00:44] We have an idea for a show that we think would be great for Netflix. 

Sascha: [00:00:47] And Netflix wasn't alone in offering big money for exclusive deals. Spotify, Amazon, Apple, a lot of the big streaming platforms wanted a slice of the pie. And where there's money, celebrities so often followed. Barack and Michelle Obama joined Netflix after leaving the White House, signing a rumoured $100 million plus deal and a $25 million three year Spotify contract. And following Megxit the Sussexes, Prince Harry and Meghan Markle also signed a $100 million deal with Netflix and a $30 million Spotify deal. And they're not alone. Super producer Shonda Rhimes, the creator of Grey's Anatomy, she inked a nine figure deal when she left ABC. And Ryan Murphy, the creator of Glee and American Horror Story. His deal was $300 million. And of course, how could we forget Joe Rogan who captured headlines with his $200 million Spotify deal? Fast forward to the beginning of 2022, and Netflix's stock price has fallen 65%. The streaming giant started the year valued a little under 300 billion, but now is worth just 90 billion. Spotify, it's seen a similar fall to Netflix. They started the year valued at almost 50 billion and today they're worth a little over 20 billion. And now we're seeing these streaming services start to walk away from some of their biggest deals. It's Friday, the 6th of May. And today, I want to know, are these big celebrity streaming deals worth the money? To talk about this today, I'm joined by my colleague and the co-founder of Equity Mates, Alec Renehan. Alec, welcome. 

Alec: [00:02:33] Hi, Sascha. I'm excited for this one. 

Sascha: [00:02:35] I know you and I just love talking content, streaming media, any of those things. So I can't think of a better person to talk to about all of this. Today, we're just going to focus on three big deals the Obamas, the Sussexes and Joe Rogan. But you and I both know they're just the tip of the iceberg, aren't they? 

Alec: [00:02:53] That's right, Sascha. As you said in your intro, Spotify and Netflix have been throwing money around in video for Netflix. They had a look at Adam Sandler and claimed that in 2020, viewers had watched over 2000000000 hours of Adam Sandler movies. I know you're amongst them, Sascha. So what did they do? They signed him to a 275 million for film deal. 

Sascha: [00:03:17] I reckon that was just drunk people on a Saturday night, to be honest.

Alec: [00:03:20] Well, Adam Sandler wasn't alone. Netflix also paid Will Smith $35 million for Bright two. As if we needed a sequel. 

Audio clip: [00:03:30] Why is there a fairy in the birth area? 

Sascha: [00:03:32] Did you watch that one? 

Alec: [00:03:33] No, I did. I think it was that movie about, like, fairytale creatures being cops. 

Sascha: [00:03:39] I have no idea. I never watched it at home. 

Alec: [00:03:40] I did not. But look in audio, DAX Shepard signed an exclusive deal with Spotify, estimated at $50 million. And Alex Cooper, the host of Call Her Daddy, signed a $60 million Spotify deal, the biggest ever for a female podcast host. So, Sascha, you could be next. 

Audio clip: [00:03:59] What is up, Daddy? Gang, it is your founding father, Alex. 

Sascha: [00:04:03] Cooper with call. I have listened to call her daddy and I can't say that I'm ever going to venture into that kind of subject matter. But, you know, my career is young. 

Alec: [00:04:11] It would be a hard left turn for the dive. But look, if we zoom out from these individual deals and look at the bigger picture, Spotify has spent over $1,000,000,000 tying up podcasters to exclusive contracts where they only release their podcast through Spotify and not through Apple Podcasts, Google Podcasts, any of the other platforms. And Netflix is just spending crazy amounts of money on content. $17 billion is their estimate for this year, up 25% from last year, up 57% from 2020. It's a lot of money. 

Sascha: [00:04:45] And you've touched on a really interesting word there, which is the exclusivity, which we'll talk about in a moment. But I'm unsure about how I even going to get to a point where we can see if these deals are worth it. Let's take it one by one, as you suggested. And let's start with the Obamas. 

Audio clip: [00:05:02] The Obamas are in advanced talks with Netflix to launch some kind of streaming programme. And First Lady Barack and Michelle Obama are coming to Netflix. That's right. Today, Netflix announced a multi-year production deal with the Obamas. 

Audio clip: [00:05:15] Former President Barack Obama is hosting and narrating a new docu series for Netflix. 

Alec: [00:05:20] So now, Sascha, the big question, have you watched any of the Obamas content on Netflix or listen to any of their podcasts on Spotify? 

Sascha: [00:05:29] I think I tried The Renegades, the one with Bruce Springsteen, but I can't really remember it, and I'm not sure I got much farther than the pilot episode. 

Alec: [00:05:39] So I listened to the first episode of the Michelle Obama podcast, and I listened to the first episode of Renegades, though both good. But for me, Spotify wasn't where I listen to podcasts, so I kind of just dropped off. I have heard good things about Barack Obama's new Netflix documentary. He's taken a bit of an Attenborough turn, and it's called Our Great National Park. 

Audio clip: [00:06:02] Join me in the celebration of our planet's greatest national parks and wilderness. 

Alec: [00:06:09] But there's a number of other documentaries the Obamas have produced American Factory, which I think won a bunch of awards. Crip Camp Worth becoming. And I'm going to be honest, I haven't watched any of them. 

Sascha: [00:06:21] So I haven't engaged in a lot of the Obama's work, and neither have you. So has anyone has it been worth it for Netflix and Spotify? 

Alec: [00:06:30] Has anyone? That is a tough question. That's a fall from grace for the former first couple, and it's hard to know. Netflix and Spotify aren't exactly forthcoming with a lot of these details. So what we do know is that Michelle Obama's podcast launch really well, it was Spotify's most listened to podcast in the summer of 2020. But we don't really get good listener numbers or good viewer numbers from Spotify or Netflix. 

Sascha: [00:06:55] Yeah, they're notoriously cagey, aren't they? 

Alec: [00:06:58] And attribution is hard when you've got a subscription service and millions of people are signing up and unsubscribing every month. How do you attribute what content is driving these subscriptions? But if we do some back of the envelope maths, a Spotify subscription in the US 9.99 a month, so call it 120 bucks a year. If Spotify paid the Obamas 25 million, that's the equivalent of 208,000 yearly subscribers to break even. That's the number of new subscribers the Obamas need to drive to the platform on the Netflix side for the Obama deal. Netflix, the very basic package is also 999 a month in the US, 120 bucks a year. So the $100 million Obama deal from Netflix needs to bring in 833,000 subscribers to make it worthwhile. And that's really the basic maths that these streaming services are doing. When thinking about making these deals, Netflix, it's tough to make an assessment, but based on recent reporting about Spotify, we can say that deal probably wasn't worth it. 

Audio clip: [00:08:02] And the Obamas are splitting with Spotify. That is. Bloomberg first reported that former first family's production company Higher Ground is ending its exclusivity deal with the audio streaming service and shopping for new partners in the podcasting space. 

Sascha: [00:08:16] So that's why we're talking about this today. That's why it's newsworthy. The Obamas are apparently looking to leave Spotify. Can you break down for me what happened? 

Alec: [00:08:25] That's right. End of the three year deal between the Obamas and Spotify. And it looks like they're parting ways. Apparently, a key point of tension has been in the production process. Spotify want the Obamas to host shows. They want their voices to be hosting the podcasts. But the Obamas want to introduce and elevate new voices. So at the end of their three year deal, Spotify chose not to make an offer for a new deal for the rights to Obama lead material. 

Sascha: [00:08:54] I feel like we could talk shop so easily about this, but it's pretty clear to say from Spotify's end that they've decided it just wasn't worth it. 

Alec: [00:09:03] And I'm not surprised. So Michelle Obama released ten episodes of her podcast back in 2020. Barack Obama and Bruce Springsteen released just eight episodes of their podcast, all in 2021. So when we think back to our back of the envelope, maths, Spotify needs over 200,000 new subscribers from the Obamas podcasts to make this deal worthwhile. And then they need to keep those subscribers to make it worthwhile, longer term, to make money from the deal. Ten episodes in 2020. Eight episodes in 2021. That's probably not enough to get people to switch their podcast up and then justify that $10 a month subscription ongoing. 

Sascha: [00:09:46] Yeah, I don't want to throw ourselves in the mix here, but I heard a rumour you prepared six episodes last week and Joe Rogan produces about ten episodes in a week. So it isn't a lot of content for a $10 a month subscription when you compare it like the like with other media producers.

Alec: [00:10:04] Yeah. Look, we'll get to Joe Rogan and Spotify a bit later. But I think you're right, Sascha, it's you know, you can listen to those ten episodes in one month and unsubscribe. So I think these limited series from big celebrities haven't been worth it for Spotify. Netflix a little bit different. It seems that the Obamas continue producing new content and that deal seems to be a little bit better. But look, we should be clear that there's plenty of people chasing the Obamas now. The former first couple are in talks with basically every other big podcast company for a deal. Amazon's Audible Iheartmedia are apparently the frontrunners, but someone is going to pay the Obamas tens of millions of dollars to keep podcasting. 

Sascha: [00:10:49] Alec. I don't know about you, but $25 million to produce 18 episodes of content. That's a deal Equity Mates would take in a. Who's calling us from Spotify? But to wrap all that up, it does look like the Obamas deal may have not been worth it for the streaming giant. And. I'm sure they're going to find a better deal elsewhere. It's not like their star power has reduced over that time. Let's talk about the Sussexes and Joe Rogan. But first, let's take a quick break. Welcome back to the dive. Before the break, we spoke about the Obamas deal with Spotify and Netflix. Perhaps the next most high profile deal has been the Sussexes Prince Harry and Meghan Markle. They also signed pretty similar deals with Netflix and Spotify, but I've heard that Meghan's had some pretty tough news this week. Right over the weekend, the streaming. 

Audio clip: [00:12:19] Giant. 

Sascha: [00:12:20] Has shelved Meghan's project. This was. 

Alec: [00:12:23] It. That's right, Sascha. Netflix cancelled her pilot at 12 Productions. The company of Harry and Meghan was set to create an animated series called Pearl. But after a rough start to the year, Netflix has dropped the series as a cost cutting measure. Meghan was set to co-produce this family friendly show with Elton John's husband, David Furnish. 

Sascha: [00:12:45] It was going to call it The Adventures of a 12. 

Audio clip: [00:12:47] Year old girl and said to be inspired by.

Sascha: [00:12:49] Meghan's own story here. And to be fair, Meghan's not alone. Other people have been dropped, right? 

Alec: [00:12:54] That's right. Some big names have had their shows dropped. Steve Carell and Will Smith have both had projects cancelled by Netflix in the past few weeks. 

Sascha: [00:13:02] Is that brought to light?

Alec: [00:13:03] I actually don't know. But honestly, the world will mourn the loss of Bright too, if it is. 

Sascha: [00:13:10] I mean, we're being so mean. Neither of us have seen it. All right. 

Alec: [00:13:14] Sascha, go for the weekend. We should both watch Bright. 

Sascha: [00:13:16] Okay, so I know Meghan was an actress on suits, but I didn't know her as a producer or someone who was in the business of creating content. How did they land this deal? 

Alec: [00:13:28] Yeah, I think that's a good starting point. Meghan actually had some experience. I used to watch suits, so went downhill after she left my bros. 

Audio clip: [00:13:36] I'm Rachel Zane. I'll be giving your orientation.

Alec: [00:13:38] She might not have been behind the camera, but she has some experience more than the Obamas, we could say. But this was about the Sussexes producing a slate of shows for Netflix and a slate of podcasts for Spotify. 

Sascha: [00:13:51] So again, the multimillion dollar question, was it worth it? 

Alec: [00:13:54] Yeah, the multi multimillion dollar question. So with the Obamas, we sat on the fence a little bit with the Netflix deal and we concluded that whilst the Obamas produced some podcasts, it probably wasn't worth it for Spotify. And we can say that by Spotify not wanting to renew, but with the Sussexes, Sascha, there's no fence sitting here. I think we can pretty easily conclude that these deals have not been worth it. The Netflix deal was signed in September 2020. The Spotify deal was signed in December 2020, so a couple of years ago now. And we haven't really seen any content from those deals. You were telling me before we got on Mike that there was an Elephant documentary that Meghan. 

Sascha: [00:14:34] Voiced Social life.

Audio clip: [00:14:35] Is like oxygen. 

Sascha: [00:14:36] For these elephants. 

Alec: [00:14:38] And on the podcast inside we've seen one podcast from Prince Harry and Meghan, but there's only one episode on that podcast, a 2020 holiday special. And then on that fade in March this year, we saw a trailer for Meghan's new podcast Archetypes. But when I search for it in Spotify, there was no I'm. 

Sascha: [00:14:58] Meghan and this is archetypes I know I like. I tried to do the same just to, you know, do my due diligence, do my fact checking. And I just ended up in this kind of wheel of ending back up onto their Archewell media site. So rule number one of launching a podcast you and I both know have the feed live before you release the trailer. 

Alec: [00:15:17] That's it. Sascha. Maybe we could do some consulting for the Sussexes. So I think the conclusion was the deal worth it on the Netflix side, on the Spotify side, no content or barely any content. I think we can pretty easily conclude that if we go to the back of the envelope maths, we started the show with that these deals need to drive new subscribers to make it worth it. We can conclude that no yet. Yet maybe there is a slight of content coming that drives subscribers at the tail end of these deals and it becomes worth it. But where we sit today, 6th of May 2022, there's a pretty clear conclusion. 

Sascha: [00:16:00] I totally agree. I like I can definitely see where you're coming from with those. Let's move to the final deal, which is a little bit different. I think it's Joe Rogan. 

Audio clip: [00:16:09] I have an announcement. The podcast is moving to Spotify. I signed a multi-year licencing agreement with Spotify that will start on September 1st.

Sascha: [00:16:19] And I remember when this was announced in 2020 and it really signalled that podcasting had arrived in the mainstream. This was massive money, radio superstar money. 

Alec: [00:16:30] It was just when Bryce and I were thinking about quitting our day jobs through Equity Mates full time and a deal like that. $100 million well later, $200 million certainly helped us realise that podcasting could be a business. 

Audio clip: [00:16:45] Joe Rogan is a media phenomenon. In 2019, his podcast, The Joe Rogan Experience, was reportedly downloaded 190 million times in a month and in 2020. Joe Rogan's podcast was signed into an exclusive deal by Spotify for $100 million. 

Sascha: [00:17:02] Yeah. Alec, you were thinking about going into podcasting full time? I was working in radio and I think it really blew people away in that part of the industry that podcasting was being taken so seriously. $100 million price tag is just serious money, whichever way you look at it. It's come out since so that the true value of the deal would have been closer to 200 million for exclusivity for three and a half years. So again, here's the question. Has it been worth it for Spotify? 

Alec: [00:17:33] Well, Sascha, let's return to this back of the envelope maths, that this envelope is getting pretty crowded at this point. But in the US, a basic Spotify subscription, 9.99 a month. So again, $120 a year. If Spotify paid Joe Rogan $200 million over three years, that's the equivalent of 550,000 subscribers for three years. So I guess the question is, did Joe Rogan's deal bring Spotify half a million more subscribers, new subscribers that they've held for the three years? It's tough to attribute subscribers. But I think based on a few different data points, we can safely conclude it has. 

Audio clip: [00:18:16] But they just weren't ready for the volume. 

Alec: [00:18:19] In the first month that the Joe Rogan experience was exclusive on Spotify, it brought in 2.66 million unique listeners. It's the number one podcast on Spotify and it has been the number one podcast every month since it joined the platform. And after Joe Rogan's recent controversy, the Neil Young, the video that got released, all of that, he claimed that his podcast saw another 2 million subscribers on Spotify, bringing his self-reported average to 11 million downloads per episode. So if we say that the break even for Spotify is half a million new subscribers, I think we can say that Rogan's numbers probably have delivered that. 

Sascha: [00:19:01] And I think something that we haven't even touched on, but we should say, is that you can't really escape Joe Rogan being in the news. So even from a publicity point of view, he's on his money.

Alec: [00:19:12] That's it. And I think, Sascha, if we look at these deals together and we try and draw conclusions from them, it seems that when the streaming services have brought over an established star with an established audience, they have been worth it. Joe Rogan. Alex Cooper from Call Her Daddy. They may not have brought all of their listeners with them to Spotify as a platform, but they brought enough to justify the expense from Spotify. That new subscription revenue that they're adding makes it worthwhile for the streaming giant. Similarly, in the Netflix space, we've seen deals with Shonda Rhimes from Grey's Anatomy, a $150 million, Ryan Murphy from Glee, an American horror story worth $300 million. It's again, tough to attribute what is driving sign ups, but the reporting around them is that the deals have been worth it. They've made great content. 

Sascha: [00:20:05] Shonda Rhimes made Bridgerton. So yeah, she has. 

Alec: [00:20:08] Okay, I haven't actually watched Bridgerton, but I hear a lot about it. 

Sascha: [00:20:12] It's good. 

Alec: [00:20:14] So I think when it's an established star with an established audience, with an established track record, they are massive dollar figures, but they generally return enough for the streaming service. But when Spotify or Netflix try to sign big names from outside the industry that don't have experience and don't have an established audience for these channels, they generally haven't seen the return on investment they would have hoped for. 

Sascha: [00:20:40] Well, our recording finished, so I'm going to tell my phone on loud and I'm hoping that we get a call from Spotify very soon that's offering us like a little slice of the pie. Because, I mean, you and I, we know how to produce a podcast. 

Alec: [00:20:54] That's right. Spotify. The message from this is don't go to a celebrity businessperson, an Elon Musk or Jeff Bezos to produce a business show, get a business show with an existing audience and bring it across. So we await your call. 

Sascha: [00:21:07] This little episode was just our pitch. So that seems like a really good place to leave it. Thanks for joining us for today's edition of The Dive. If there's a story that you would like us to talk about, then just contact us. It's the dive at Equity Mates dot com or shoot us a message on social media. We love hearing from you. And speaking of things that we love, we love five star reviews, please, wherever you're listening, Spotify, Apple Podcasts, your favourite podcast player. It really does make all the difference. We're going to be back in your feed on Monday. In the meantime, thanks so much for talking about one of my favourite topics with me, Alec. 

Alec: [00:21:44] Thanks 

Sascha: [00:21:45] Until next time.