Rumour on the street is that Joe Rogan's blockbuster deal is a steal for Spotify and a bad hand for him.

Basically, Joe Rogan is getting ripped off. He's given up the monetary upside of his business for small conveniences.

Let me break it down [Thread]:

If the publicised numbers are true, Spotify just secured the largest podcast audience in the world for $100-$200m. That's a bargain.

Spotify’s market cap jumped by $3 billion in the 24h after the news of this deal broke. That's the power of ownership. /2

On the surface, it sounds like a sweet deal for Joe.

Listeners still get the pod for free—but only on Spotify. Spotify Premium subs get the pod w/o ads, but free users will have to listen to ads (sold by Spotify).

Joe previously made c.$64m annually. Now he gets 2-4x that. /3

So he's getting up to 4x the money, and doesn't have to worry about the business end. Perfect, right?

Not really. The gold here is his audience. He's losing control of that.

If he leaves Spotify in 3yrs he'll lose any monetary value from new subs in that time. /4

Joe could've kept selling ads in addition to offering a subscription-only ad-free stream, + possibly bonus eps/extended content/live streams for paying subscribers only.

Joe's audience is c.12m listeners.

Converting just 5%, that's over $33m in annual recurring revenue. /5

An extra $33m doesn't sound like much but remember he's already making c.$64m in ad revenue. This puts Rogen at almost $100m fully independent of Spotify.

And how much is his Spotify deal worth? c.$100m. Same money, 100% ownership.

But there's more... /6

Joe Rogan would've been building his own empire w/ recurring annual revenue.

Imagine a startup w/ crazy recurring revenue, low churn and insane margins, growing at 25-50% per year! That's Joe Rogan.

That's what Spotify is seeing. That's why they'll happily pay. /7

This model isn't new or rare. Look at his mate Sam Harris.

Sam aggressively pushes a sub. model. He has c.1.5m listeners. He's been doing this since 2014.

If he converts free listeners at a 5% rate at $5/month that gets him $4.6 million in annual recurring revenue. /8

Now imagine instead of 5% he's converting at 20% (more likely).

Suddenly that's $18.4 million in annual recurring revenue. With only 1.5m listeners.

Joe Rogen has up to 12x that audience. /9

TL;DR

Spotify deal = c.$100m

Min opportunity cost:
Ad rev - $50m
Subs @ $5 - $33m
Youtube - $27m
Total: $110m

Max opportunity cost:
Ad rev - $200m
Subs @ $10 - $66m
Youtube - $68m
Total: $334m /10

I want to end by saying I completely respect Joe Rogan. I'm sure he looked at the numbers with his team and made the best decision for him and his family.

He's 52. He might not WANT to have the effort of running the business end. Maybe he just wants to sit down and podcast. /11

I'm just sharing this to show what could've been possible.

AND, why Spotify will be eating off this deal for YEARS.

It's a steal for them.

In short, ownership is key. Your audience is your goldmine. /12