Neil Young and Joni Mitchell’s feud with Joe Rogan shows the difficulties of Spotify’s streaming music business.

By forcing Spotify Technology SA to choose between him and its most popular podcast, Canadian music icon Neil Young has highlighted a long-simmering tension at the core of streaming music: Even for the world’s largest subscription audio platform, it’s hard to make money on songs alone.

The musician gave an ultimatum to Spotify this week: stop giving a platform to The Joe Rogan Experiencethat Mr. Young and hundreds of medical experts have said it spreads false information that discourages the adoption of COVID-19 vaccines, or remove Mr. Young’s catalog – one of the most popular in the world, thanks to albums like After the Gold Rush, Harvest y Rust never sleeps. Joni Mitchell, fellow Canadian-born alumna of Los Angeles’ Laurel Canyon music scene, asked Spotify to do the same for her catalog late Friday.

Spotify did not hesitate to pull Mr. Young’s catalog a day after his request, prompting many subscribers to say they were abandoning the platform. The conflict has brought to light the priorities of a company once hailed as the savior of the music business.

Joni Mitchell joins Neil Young and removes her music from Spotify.

“Podcasting is their big strategic bet, and Joe Rogan is the centerpiece of that strategy,” said Tatiana Cirisano, a music industry analyst and consultant at Midia Research. The streaming company spent $100 million for the exclusive rights to Mr. Rogan’s show in 2020.

“Spotify can’t afford to lose Joe Rogan or its audience,” Cirisano added.

Subscription audio platforms like Spotify have always struggled to turn a profit, largely because of the royalty costs owed to musicians. Meanwhile, musicians have consistently been outraged by the amount of royalties these platforms actually deliver, often arguing that their ability to make a living has been reduced compared to the golden age of physical media. The result is a platform that frustrates both the creators who feed its content and the investors who fuel its growth. The company has also been caught up in the recent tech selloff, with shares falling to about $173 apiece from a high of more than $300 last year.

Faced with this dual problem, Spotify has expanded its offerings to include podcasts, and has increasingly framed itself as an all-audio platform since going public in 2018.

The Stockholm-based company has 381 million users, 172 million of whom pay subscription fees that typically amount to about $10 per month. The rest use its ad-supported tier. Spotify has spent hundreds of millions of euros since its IPO acquiring media and podcast brands such as The Ringer and Gimlet, as well as technology companies to help it monetize podcast advertising. The buying spree has turned that part of its business into a cash cow, while the music side struggles for revenue.

Podcast advertising is a growing and lucrative market. The Interactive Advertising Bureau of Canada found that digital audio ad spending reached $96 million in 2020. And research firm eMarketer reported last month that. 2021 was the first year that Canadians spent more time listening to digital audio than terrestrial radio.

Losing Mr. Young or Mr. Rogan would have posed a reputational risk to Spotify, said Catherine Moore, an associate professor of music, technology and digital media at the University of Toronto. “But in terms of financial risk, it’s much greater if Joe Rogan leaves Spotify,” she said.

Over the past two decades of turmoil in the music industry, Mr. Young has rarely taken difficult developments in stride. Despairing over the poor sound quality of digital music, he spent years promoting a high-resolution audio player and download service called Pono, a since-abandoned project that earned both praise and derision for its faith in musical purity at a time when it was hard to get consumers to pay for anything music-related.

Mr. Young’s music has always had a progressive, power-fighting bent, but his stance on vaccine misinformation may also have been directly influenced by his life experience: He had polio as a child. In one open letter since deleted this week, he asked his representative and his record label, Warner Records, to remove his music from Spotify because, he alleged, Mr. Rogan’s podcast is “spreading false information about vaccines, potentially causing the deaths of those who believe the misinformation they are spreading.”

Although Spotify told The Wall Street Journal that it has deleted more than 20,000 pandemic-related podcast episodes in the past two years, Mr. Rogan’s enormous popularity and the exclusivity agreement pose a user retention and free speech problem for the company. Even the director-general of the World Health Organization, Tedros Adhanom Ghebreyesus said on Twitter on Friday. that he supported Mr. Young’s decision.

“Spotify is becoming almost like a media outlet, in the sense that the typical business model of a media outlet is that it fits between content and advertising,” Professor Moore said.

Thousands of people said this week on social media that they would remove Spotify in favor of other services, such as Apple Music – which is understood to pay a higher royalty rate than Spotify – and Bandcamp, which has become a haven for independent musicians through its direct download business model and routine revenue-sharing initiatives.

Many musicians need Spotify revenue to survive, especially as the pandemic has wreaked havoc on the gig business. Faced with this problem, some artists have said they stand with Mr. Young, but can’t follow his lead. “It will take a principled sacrifice by the bigger artists who can afford to take the hit for things to start getting better for the rest of us,” said Polaris Music Prize-winning rapper and producer Cadence Weapon. He wrote on Twitter. Wednesday.

Vish Khanna has interviewed hundreds of musicians for his long-running Kreative Kontrol podcast, and decided this week to ask his distributor to pull the show from Spotify, which accounts for about 12% of his listeners. “There has been some anxiety in my life since I made this decision,” he said in an interview.

The Edmonton podcaster has been following the music industry for decades. He said he had long been frustrated about distributing his podcast on Spotify, a platform that he believes doesn’t pay musicians fairly for their work.

While he believes other platforms are similarly unfair, Spotify has routinely irritated artists. The company’s CEO, Daniel Ek, once suggested. in an interview that musicians who produce works through traditional album cycles have to work harder.

Historically, Khanna has shown his frustration in quietly symbolic ways, for example, by using a devil emoji next to Spotify links in social media posts to promote his episodes. Now he has opted to be more explicit. “It’s a stance I wanted to take,” he said. “I’m hopeful that people will find the show in other ways.”

Spotify representatives Mr. Young and Mr. Rogan did not respond to requests for comment.

Spotify has posted strong revenue growth in recent quarters, but solid profits have remained elusive even as its monthly active users reached 381 million in the third quarter. In October, the company reported revenue of nearly €7 billion for the nine months ended Sept. 30, but only €5 million in net income. It expects fourth-quarter operating losses of between €72 million and €152 million.

Mr. Young had about six million monthly listeners on Spotify, which he said accounted for about 60% of his streaming revenue. George Howard, an associate professor of music business and management at Berklee College of Music in Boston, noted that Mr. Young has often left money on the table when opportunities have not aligned with his values, regularly choosing not to license his music for commercial use.

“If Neil Young wanted to cash out, he could simply license. Rockin’ in the Free World to Pepsi,” said Professor Howard, a former independent record label and distribution executive. Now the rest of the world is understanding Spotify in the same terms as Mr. Young, he continued.

“They’re not a music platform, they’re a wealth transfer platform,” he said. “You can take the Milton Friedman view of increasing shareholder value, but there’s a greater duty to society.”

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