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Spotify going through mega-platform test amid Neil Young-Joe Rogan saga

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Soundtrack Your Brand CEO Ola Sars joins Yahoo Finance Live to discuss Spotify removing Neil Young's songs after the rock legend's Joe Rogan ultimatum.

Video Transcript

- Well, it looks like Neil Young will keep rocking in the free world. His music has already found a new home one day after Spotify refused to give in to the rocker's ultimatum to drop Joe Rogan's podcast from its platform over fake vaccine information. Young's music will now be streamed exclusively on Sirius XM. The controversy is generating so much attention today that the hashtag, #SpotifyDeleted is currently trending on Twitter.

Joining us now is Ola Sars. He is the CEO of the B2B music streaming company Soundtrack Your Brand. We're also joined by Yahoo Finance's Ali Canal.

Thanks so much, Ola, for being with us. I know you used to work for Spotify before starting your own company. They paid something like $100 million for the exclusive rights for Rogan's podcast. Does siding with him over Neil Young make good business sense for Spotify?

OLA SARS: Well, I actually started a company together with Spotify. I didn't work for them, so I was a co-founder of my current company with Spotify, but I did work with the Beats and Apple team previously and I know the industry quite well from both angles. Well, I mean, Spotify is growing up, right? It's moving from being a music platform company to becoming an audio media company.

So it's inevitable that these decisions will come and they will have to take a more proactive stance on what content goes through the platform. I mean, they're already serving more than 300 million listeners. So becoming a media company leads to these types of questions and if it's right or wrong, I think Spotify is a very intelligent company.

They come prepared to this type of situation. So I think they need to have their policies set out here and they have when they moved into this. This is probably not the only situation that they'll be in. It's probably not the only situation where certain artists don't like other types of content. There's probably stuff going on in Europe and the US at the same time. So this will be day to day business for Spotify handling, like any other media company moving forward.

ALI CANAL: And Ola, we should mention that Yahoo Finance did reach out to Spotify for comment. We have not heard back at this point, but what kind of precedent do you think this sets moving forward and do you think the power here lies in the streamers or the artists themselves?

OLA SARS: Well, moving to becoming a media company, it's about serving the consumers and serving not just a couple of hundred million consumers, maybe even a billion consumers moving forward. So once again, it's inevitable that there would be conflict in what content is distributed through the platform. So Neil Young's position, obviously, he has the right to have an opinion of where his music is being distributed.

He has the right to put it there or pull it back. And so does anyone on the platform and they can. So once again, the trick here for Spotify or any type of media platform, I mean Facebook, YouTube, Twitter, they have all been through this, right? And this is just Spotify's time to go through the same type of situation that these media companies have gone through.

And I think the general stance for a company at that magnitude and growing up into becoming a global media giant like Spotify is, is to follow the regulation on the local markets and follow the law and maybe not take too much of a proactive stance in choosing what content and what not content to be there. But follow the policies in place, the legal frameworks in place and then kind of let the free market speak.

KARINA MITCHELL: Yeah, Ola, this is Karina Mitchell. Thanks for coming on. I want to ask you how difficult is it to get a handle on illegal use and rights issues and how much revenue do you think is lost?

OLA SARS: In terms of, do you mean with the Neil Young situation, that, that would affect the actual revenue on the model?

KARINA MITCHELL: Yes, and more broadly, just in the sector itself. There is so much illegal use that goes on. So how much revenue loss is there? It's hard to get a handle on it, isn't it?

OLA SARS: For sure. I mean, look, media in general with the internet is still in its early stage, right? We have a content going through all these platforms that go through takedown procedures and the platforms, the media platforms in place to have effective procedures. The YouTube debate has been around for a long while, where a lot of IP went up that wasn't actually cleared.

For Spotify, they don't have that challenge because they actually cleared all of the music that they are distributing through labels and publishers worldwide. So they're a much cleaner media platform in terms of music. But moving into podcasts and augmented audio, if you may, there's going to be more and more productions that come on board and maybe even all the way to actually content produced by consumers that is being distributed, and that challenge comes along as well.

But in terms of lost revenues, Spotify has a subscription business model and they're dependent on subscribers paying a monthly subscription. I personally don't think that paying subscribers will leave a platform because there's one program that is being distributed, that doesn't have the same opinions as they have. That's what happens on all media platforms, I would say. So I don't see that this issue specifically will lead to subscribers leaving Spotify, not at all actually.

They've been through this and so have all the other platforms before and consumers kept paying the bill and staying with this great music service. So no, I don't think so. But when it comes to, for example, terms and conditions in general on these services, it's hard to have all consumers follow them, of course.

But the company's responsibility is to clearly communicate those terms and conditions and then try to see that consumers comply to those terms and conditions. And they have in this instance. So they've actually followed the rule book quite nicely.

ALI CANAL: And Ola, this is not the only time that Spotify has found itself removing content. Just last month the platform removed the recordings of hundreds of comedians over royalties dispute. As a business that's really meant for public consumption, how can it balance pleasing its users while juggling all of that noise from people requesting to be removed from the platform, to royalties disputes? Because if I was a user, I'd be pretty upset about this.

OLA SARS: Right, and once again, I just want to take the example of the other big media companies. I mean, YouTube is the most clear example, right? They go through this every day and they've been through it for years now.

Spotify is entering into it with its audio only product and they just need to get the systems in place, the processes in place and the policies in place and play accordingly and they'll do fine because it's not a new challenge. They're not the first consumer content distributed platform and they have a lot that they probably have learned from the other ones and their mistakes. But once again, the general approach is clearly communicate the policies, clearly communicate the terms and conditions and follow the law, and Spotify will be fine.

- Transparency is key. Ola Sars, CEO of Soundtrack Your Brand. Thanks so much.

OLA SARS: Thank you.

KARINA MITCHELL: OK, thank you. Thank you. And we are going to shift gears--