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Entertainment

These Children Are Making Millions on YouTube

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Three years ago, YouTubers who go by Vlad, Niki, Diana and Nastya were friends cruising around Miami on a 97-foot yacht to celebrate a birthday. Today, they are locked in a fierce rivalry over YouTube supremacy.  

They’re not even 10.

The children are stars of three YouTube channels—“Vlad and Niki,” “Like Nastya” and “Kids Diana Show.” They are the three most popular live-action YouTube kids channels in the world, with nearly 300 million YouTube subscribers between them. Now they’re expanding into everything from streaming shows to branded toys to licensing deals, all worth tens of millions of dollars.  

“‘These kids who came from nowhere have more influence than Mickey Mouse.’ ”

“These kids who came from nowhere have more influence than Mickey Mouse,” says Eyal Baumel, a longtime strategist for YouTube personalities, including “Like Nastya.”

Across the three channels, the videos play like live-action cartoons in a suburban fantasy land. Kids dress up like superheroes, crawl over giant vegetables and drive around in motorized toy cars. Mom and dad are sidekicks. 

The more success the kids have found, the swankier the toys and outings have become. In one video, Vlad and Niki snub mom and the Range Rover she bedecked in fluffy pink boas for a ride in dad’s hot red Ferrari. In another video from this year, the “Kids Diana Show” hits the road, staying in a resort in Maldives where the kids and parents hop aboard a yellow submarine.  

Videos feature lots of “oohs,” “aahs,” applause and minimal dialogue—which makes it easy to redub the YouTube posts, which are mostly in English, into other languages including Arabic, Spanish or Indonesian. 

“Kids feel that Vlad and Niki are their friends,” says their mother, Victoria Vashketov, of her children, who are 9 and 7 years old, respectively.

Toy makers pay the young celebrities to play with their products. Rates can range anywhere from $75,000 to more than $300,000, according to a person familiar with such deals. 

The YouTubers also have exclusive lines of playthings branded with their names and likenesses. There’s a caped Vlad action figure and palm-sized figurines of Diana’s entire family, which can be purchased at big U.S. retailers like

Walmart

and Target as well as in countries including Sweden and Mongolia, according to the channels’ representatives. 

Shenzhen, China-based Zuru Toys produced a specialty line of “Vlad and Niki” toys after entering into a partnership with the family in 2020. The company’s co-founder,

Nick Mowbray,

says he got into business with the boys because they have appeal globally.

The Youtube awards the Vashketov family has received are on display in their home just outside Miami.

Major streaming services are putting the videos on platforms including HBO Max and Amazon too. 

“You can create a global franchise without a major studio,” says Dan Weinstein, who represents “Vlad and Niki” under the banner of his company Underscore Talent and has helped other internet sensations cross over to traditional media channels. “I think that’s pretty mind-blowing to think about.” 

Timing is everything

Around the time that Vlad, Niki, Diana and Nastya were toddlers, iPads were becoming the new babysitters and videos featuring toddlers unboxing new toys on camera were taking over children’s content on YouTube. 

Among the young personalities that began influencing consumer behavior was Evan from EvanTubeHD, a toy and gaming YouTuber who started posting videos featuring Angry Bird toys when he was 5 years old and became one of the first kid YouTubers to achieve stardom on the platform. Ryan Kaji—often hailed as the reigning kid king of YouTube—was reviewing popular toys like Thomas the Tank Engine and raking in millions. They created a formula for the kinds of videos that could rack up millions of views: Give a cute kid a coveted name-brand toy, film them playing with it, then post. 

The three families leaned into that formula.

Vlad and Niki’s parents started making videos out of their home in Moscow. Sergey Vashketov was a midlevel executive at a food manufacturer; Victoria, a former gymnast. Early videos, which are in Russian, show Vlad and Niki guzzling bottles of

Coca-Cola

and frolicking with life-size bags of M&Ms and Skittles. 

Nastya, whose full name is Anastasia Radzinskaya, comes from Krasnodar, Russia. Her parents say they started posting videos of their daughter on YouTube to show off her speaking skills after a doctor falsely diagnosed her with cerebral palsy and said she might never speak. Some of Nastya’s first videos show her playing with Legos and opening a

Disney

-themed mystery egg. 

Diana’s parents—Olena and Volodymyr Kidisyuk—started making videos out of their home in Kyiv, Ukraine, training their camera on their daughter and older brother Roma, who played with popular toys in videos like Peppa Pig, Hot Wheels and Play-Doh.

Each of the three channels began humbly, staging the videos in basic locations like at the kitchen table or in a local park, shooting with smartphones and employing very little, if any editing. After videos began racking up millions of views on YouTube, the parents saw an opportunity to create a business around them, and they began investing in making more polished videos involving more extravagant locations and toys. The more popular the videos, the more often YouTube’s algorithm recommended their posts to kids. 

Eventually, the families moved from Ukraine and Russia to sunnier spots like Dubai and Thailand that allowed for filming outdoors year round. About four years ago, the three families met in Miami and began a friendship, according to Ms. Vashketov. Nastya, who was having a birthday party, invited Vlad, Niki and Diana. Through the years the families have hosted several other birthday parties together, filming their kids playing together while the lucky birthday boy or girl opens mountains of flashy new toys. Birthday videos also perform really well on YouTube, says Ms. Vashketov.

Traveling to amusement parks and going on vacation also often feature in videos. Between them, the three families have filmed and posted videos from places like Thailand, Italy, Hawaii and the French Alps. They’ve also spent time together in Dubai where two of the families lived full time for a spell.

Luck and timing were important. So too were analytics, said Mr. Weinstein, who has been advising digital creators like the Vashketovs for more than a decade. 

YouTube helps creators build their audiences by providing data-driven tools that can analyze how their videos perform and help plan their content. That includes knowing what YouTube audiences are searching for, what the creator’s viewers are searching for, when they are on YouTube, other channels that the audience watches and other data points. It allows creators to engage in their own brand of A/B testing, tweaking each nuance of a channel’s presentation to see how it might impact viewership, including the color scheme, titles for the videos and even what types of thumbnail photos impact viewership.

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“Sergey and Victoria are voracious students of YouTube and content creation,” said Mr. Weinstein.

Today, the families have teams of people working behind the scenes. 

“Vlad and Niki” has a film crew of up to five people at a time, including location scouts, camera operators and people to help secure props. They also work with people to help translate videos for their foreign-language channels, a mobile-gaming applications design team and an assistant who helps manage social media.   

The Kidisyuks signed with pocket.watch, a company that helps YouTube kids and family creators build franchises around their channels, including additional branding and merchandising opportunities, consumer products, mobile gaming and the development and licensing of additional content. Pocket.watch represents more than 30 kids and family creators, including Ryan Kaji.

The Vashketovs recently bought a $12.5 million, eight-bedroom mansion.

Hollywood studios have taken interest too.

Nastya’s team is developing an animated series with Will Smith’s production company, Westbrook.

Netflix

has shown interest in the series and talks are ongoing, according to a person familiar with the matter. 

HBO Max spent seven figures licensing “Vlad and Niki” content for its service, according to another person, who added that the streamer is considering producing two scripted shows including an animated series based on the two boys. 

Netflix and HBO Max didn’t respond to requests for comment.

Diana and Roma starred in a promotional video for Paramount’s recent “Paw Patrol” movie and at one point had content available on both Amazon Prime and

Roku.

The sister and brother duo also have an animated YouTube series featuring Diana’s alter ego, Princess of Play, sparring with her nemesis Boris the Baron of Boredom. 

Competition

With such lucrative deals up for grabs, the rivalry among the channels has intensified over the years, causing the families to drift apart, according to people close to the families. 

Competition is especially stiff between Diana and Nastya, who both appeal to girls. The two are neck and neck on YouTube. Nastya currently has 102 million subscribers while Diana has 104 million. Sometimes battles erupt between merchandising partners fighting over things like prime shelf space at major retailers, said one person. 

Vlad and Niki’s mom says she sometimes will check to see how well Nastya or Diana videos have performed. But Victoria Vashketov plays down the competitiveness: “As parents, we all get along, and all the kids enjoy playing together.”

The families also share a brewing dilemma. Soon, their kid stars will grow into adolescents, perhaps too old to be making videos for preschoolers. 

Vlad already has an eye on the future, saying he dreams of following in the footsteps of YouTube’s top creator, MrBeast, who regularly produces elaborate contests or challenges he posts to his channel. Additionally, Mr. Weinstein is lining up opportunities for Vlad and his brother to get into the music business, hiring producers and songwriters who have worked with both Justin Bieber and Selena Gomez to help put together some original songs.

For now the Vashketovs are enjoying being settled right outside Miami, something that helps give the boys consistency with school, the parents say. They recently bought a $12.5 million, eight-bedroom mansion located in the swanky town of Golden Beach.

And the Vashketovs say their kids can stop making videos any time they want. “Our inspiration really comes from Vlad’s and Niki’s interest,” says Sergey. “If we try to do something that they are not into, it doesn’t look authentic.”

As Vlad gets older, his 3-year-old brother Christian may step in. Ms. Vashketov says, even though Christian has appeared in several videos already, there are no plans to create a channel for her youngest son. That also goes for the baby girl Ms. Vashketov gave birth to in September.

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Business

Disney+ Price Increase Shows Limits of Subscriber-Growth Push

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The growth-at-all-costs phase of the streaming wars is over; now, profits are the priority.

Faced with slowing subscriber growth in their core domestic markets, some streaming services are shifting their focus from adding users to increasing their bottom line. The result is that streamers such as

Walt Disney Co.

DIS 4.68%

,

Netflix Inc.

NFLX -0.58%

and

Warner Bros. Discovery Inc.

WBD 4.43%

are each doing some combination of reducing costs, raising prices and creating new ad-supported tiers that offer content at lower prices to consumers but also establish a new revenue stream for the companies.

The streaming providers said the price increases are warranted because of the amount of content offered. “We have plenty of room on price value,” Disney Chief Executive Officer

Bob Chapek

said Wednesday.

The price increases come as growth has stalled domestically, usually the most-profitable market for streamers. Just 100,000 of the 14.4 million net new subscriptions to its flagship Disney+ service in the most recent quarter came from the U.S. and Canada. Of the rest, about eight million came from India, while about six million came from other countries, including 52 new markets where Disney+ has launched since May.

“Domestically, Disney+ is tapped out,” said analyst Rich Greenfield of LightShed Partners. “Disney is operating under the belief that, just as in their theme parks, they can raise prices dramatically and count on customers not dropping the service.”

Disney said that in early December it will raise the price of its ad-free, stand-alone Disney+ service in the U.S., to $10.99 a month from $7.99, and the company will begin offering an ad-supported tier for Disney+, starting at $7.99. The company also announced increases to one of its bundle packages.

In addition, the company scaled back its projections for total global subscribers to Disney+, largely in response to lower anticipated growth in India, where Disney recently was outbid for the right to stream matches from a popular cricket league.

Markets welcomed news of the price increases and the company’s better-than-expected quarterly results. Shares of Disney rose 4.7% on Thursday to close at $117.69.

Investors and analysts expect higher subscription costs and the introduction of ads to Disney+ to result in higher profits from the streaming segment, but add that price increases risk alienating some customers and increasing the platform’s churn rate, or the percentage of users who cancel the service each month. The U.S. churn rate for Disney+ is already on the rise, increasing to 4% in the second quarter from 3.1% a year earlier, according to the media analytics firm Antenna.

“We do not believe that there’s going to be any meaningful long-term impact on our churn,” Mr. Chapek said about the price increases. He said Disney+ was one of the lowest-priced streaming services when it launched, and has become more valuable over time as it has added more popular shows and movies.

Other companies that focus on streaming video are making similar moves. Warner Bros. Discovery, the newly formed media giant that owns the premium television service HBO and the streaming services HBO Max and Discovery+, reported last week that it had added 1.7 million new subscriptions. As with Disney, about all of Warner Bros. Discovery’s subscription growth came from overseas—its direct-to-consumer segment lost 300,000 domestic subscribers in the quarter.

David Zaslav,

the newly formed company’s CEO, has taken an ax to Warner Bros. Discovery’s spending, scrapping multiple high-budget movies that were in production or near completion and destined for release on HBO Max, including “Batgirl” and “Wonder Twins,” after deciding that the best return on capital for them was a tax writeoff.

“Our focus is on shaping a real business with significant global ambition but not one that solely chases the subscribers at any cost or blindly seeks to win the content spending wars,” said JB Perrette, Warner Bros. Discovery’s head of streaming, on a call with analysts last week.

Warner Bros. Discovery said it expects losses in its streaming business to peak this year, and expects profitability for the segment in 2024. Similarly, Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.

Warner Bros. Discovery has signaled it will launch an ad-supported tier of HBO Max next year. The company has alluded to a new pricing strategy focused on the goal of streaming profitability, but it hasn’t revealed pricing details.

“We will shift away from heavily discounted promotions,” Mr. Perrette said.

At Netflix, customer defections jumped after it raised the price of U.S. plans by $1 to $2 a month earlier this year. In the U.S. and Canada, the company lost 1.3 million subscribers during the second quarter, more than twice the 640,000 it lost in the region in the first quarter. Like Disney+, Netflix is now looking to increase the revenue per user that they draw by selling ads.

Doing so helps streaming services make more money from their existing customer bases, while offering an alternative to price hikes, according to industry analysts.

Existing subscribers to Disney+ will be automatically put into the ad-supported tier unless they elect the higher-priced ad-free version, and some shows, such as “Dancing with the Stars,” will stream with no ads on any tier, a Disney executive said. Disney said that in general, the ad load on Disney+ will be lighter than that of other services, and will benefit from consumers who cancel cable subscriptions and replace them with streaming services.

Netflix said in July that it expected some loss of customers following a price hike and that customer departures are returning to the levels where they were before the increase.

The Los Gatos, Calif.-based company has said its coming ad-supported tier of service is likely to appeal to more-price-conscious customers who are willing to pay less in exchange for viewing ads. Netflix hasn’t said how much its ad-backed tier will cost, but it is expected to charge less than the most basic plan that is currently available, which costs $9.99 a month for a single viewer with the lowest video-resolution quality.

While there has been an overall slowdown in net subscriber growth in the U.S. and more consumers jumping between streaming services, the amount of time people spend watching streaming content continues to grow, said Marc DeBevoise, CEO of the video technology company

Brightcove.

That trend makes selling ads a more attractive strategy for streaming services, he said.

“There aren’t more people to get to subscribe, but there are more hours to capture,” he said. “It is still a growing pie of total viewership.”

Write to Robbie Whelan at robbie.whelan@wsj.com and Sarah Krouse at sarah.krouse+1@wsj.com

Corrections & Amplifications
JB Perrette is Warner Bros. Discovery’s head of streaming. An earlier version of this article incorrectly said J.B. Perette. (Corrected on Aug. 11)

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Business

Opinion: Google’s earnings should be a warning to investors in Facebook and other online-ad companies

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Google’s earnings shortfall is an indication of trouble across the online-advertising industry, and should scare investors in Facebook and other competitors.

Google parent company Alphabet Inc.
GOOGL,
-3.59%

GOOG,
-3.04%
reported first-quarter results Tuesday that were slightly shy of Wall Street estimates, with revenue at Google and YouTube both hit by the war in Ukraine and slower ad spending. The numbers weren’t the only problem, though: Wall Street analysts seemed especially disappointed in comments by Alphabet Chief Financial Officer Ruth Porat about a potentially slower second quarter and slowing revenue growth at YouTube.

Many analyst questions were around YouTube’s slowing growth rate, and whether or not the company was seeing more competition from TikTok. In the first quarter, YouTube revenue grew 14.39% to $6.9 billion, its slowest growth in the past five quarters. In the year-ago quarter, for example, YouTube revenue soared 48.7%.

Porat blamed Russia’s invasion of Ukraine; like many U.S. corporations, Alphabet suspended its business in Russia after it went to war with Ukraine. The loss of revenue from Russia was about a 1% hit on its overall revenue, executives disclosed.

“The war, that did have an outsized impact on YouTube ads relative to the rest of Google,” Porat said. “And that was both from suspending the vast majority of our commercial activities in Russia as well, as I noted earlier, the related reduction in spend primarily by brand advertisers in Europe.”

Analysts weren’t buying that explanation, sticking to questions about the rise of TikTok. One analyst said he has been hearing concerns about more competition from TikTok affecting YouTube’s mobile usage.

“We’ve seen significant investment in online video and there has been a ton of innovation, but there are 2 billion-plus logged-in viewers who visit YouTube every single month and more people are creating content on YouTube than we have ever seen before,” Alphabet Chief Executive Sundar Pichai rebutted.

In addition to YouTube, concerns about the general macroeconomic advertising environment and the outlook spooked some analysts. Porat said that in Google Services, the revenue growth rates in its advertising businesses benefited from lapping the COVID-related weakness in 2020.

“Obviously we will not have that tailwind for the rest of this year,” she said. “As discussed in prior calls, the largest impact from COVID on our results was in the second quarter of 2020, which means that in the second quarter of 2022, we will face a particularly difficult comp as we lap the recovery we had in the second quarter of 2021.”

Wall Street had been expecting Alphabet to weather the storm in the online-ads sector, where Apple Inc.’s
AAPL,
-3.73%
privacy changes to iOS have had a big impact on Facebook parent Meta Platforms Inc.
FB,
-3.23%
and other ad-based companies. Comments about its Google ad and search business are likely indicators that other internet companies could report even more disappointing results in the coming weeks, starting with Facebook on Wednesday.

In after-hours trading Tuesday, shares of Alphabet fell 4% at one point, though a major increase to its stock buyback plan — to $70 billion, up from $50 billion last year — likely helped its shares stave off much more damage, ending the session down 2.7%. Meta, which saw its stock dip nearly as much in Tuesday’s after-hours session, may not be so lucky.

If Alphabet is no longer a port in the storm, investors are going to have a tough time finding a better alternative among its few competitors.

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Business

Peloton CEO John Foley to Step Down, Firm to Cut 2,800 Jobs

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Peloton Interactive Inc.

PTON 20.93%

plans to replace its chief executive, cut costs and overhaul its board after a slowdown in demand caused the once-hot bike maker’s value to plummet.

Peloton co-founder

John Foley,

who has led the company for its entire 10-year existence, is stepping down as CEO and will become executive chairman, the company told The Wall Street Journal.

Barry McCarthy,

the former chief financial officer of

Spotify Technology SA

and

Netflix Inc.,

will become CEO and president and join Peloton’s board.

The New York company will also cut roughly 2,800 jobs, affecting 20% of its corporate positions, to help cope with the drop-off in demand and widening losses. The cuts won’t affect Peloton’s instructor roster or content.

A little over two weeks ago, activist investor Blackwells Capital LLC called for Peloton to fire Mr. Foley and explore a sale of the company, which the Journal has reported is attracting potential suitors including Amazon.com Inc.

Blackwells reiterated its call Tuesday, saying Mr. Foley should leave the company entirely rather than become executive chairman. The company also released a 65-page presentation in which it estimated a sale could value Peloton above $65 a share. Peloton shares closed Monday at $29.75.

“We are open to exploring any opportunity that could create value for Peloton shareholders,” Mr. Foley said in an interview prior to Blackwells’s Tuesday release. Mr. Foley, a former Barnes & Noble Inc. executive who co-founded Peloton 10 years ago last month, declined to comment further.

The naming of a new CEO could indicate that Peloton sees an independent future for itself, or at least doesn’t want to sell at the current depressed share price. Any deal would likely require Mr. Foley’s support, as he and other insiders have shares that gave them control of over 80% of Peloton’s voting power as of Sept. 30, according to a securities filing.

Former Spotify CFO Barry McCarthy said his strength is a deep understanding of content-driven subscription models.



Photo:

Michael Nagle/Bloomberg News

Once a pandemic darling as homebound customers ordered its exercise equipment and streamed its virtual classes and its valuation soared, Peloton’s fortunes have recently sagged, with its stock until recently trading below its September 2019 IPO price of $29 a share as lockdowns ease and gyms start to fill up again.

The company’s shares fell 2% in early Tuesday trading. The company confirmed news of the leadership changes and reported a second-quarter net loss of $439 million. Peloton also lowered its revenue forecast for its full fiscal year to a range of $3.7 billion to $3.8 billion, down from its prior range of $4.4 billion to $4.5 billion.

The company’s value has fallen from a high of around $50 billion roughly a year ago to around $8 billion last week, before its shares rose 21% Monday on news of potential suitors.

Peloton has said it was planning cost cuts and reviewing the size of its workforce and production levels. Investors have been awaiting details of its plans.

Messrs. Foley and McCarthy said that the company had long been planning to hire a new CEO and that Mr. McCarthy entered the picture in the past few weeks.

“I have always thought there has to be a better CEO for Peloton than me,” said Mr. Foley, 51. “Barry is more perfectly suited than anybody I could’ve imagined.”

Mr. McCarthy, who is in his late 60s and plans to move from California to New York, said his strength is a deep understanding of content-driven subscription models, while Mr. Foley’s is in product development and marketing.

“Together we can make a complete grown-up and build a really remarkable business,” Mr. McCarthy said. He has consulted for Peloton investor Technology Crossover Ventures, sits on the boards of Instacart Inc. and Spotify, and was CFO of the music-streaming service until early 2020.

Peloton is making other personnel changes:

William Lynch,

the company’s president, will step down from his executive role but remain on the board;

Erik Blachford,

a director since 2015, will leave the board; and two new directors will be added.

The new directors are

Angel Mendez,

who runs a private artificial-intelligence company focused on supply-chain management, and

Jonathan Mildenhall,

the former chief marketing officer of

Airbnb Inc.

and co-founder of branding company TwentyFirstCenturyBrand.

Peloton said it expects to cut roughly $800 million in annual costs and reduce capital expenditures by roughly $150 million this year. The company will wind down the development of its Peloton Output Park, the $400 million factory that it said in May it was building in Ohio, and reduce its delivery teams as well as the amount of warehouse space it owns and operates.

“Where the company got over its skis is it built out a cost structure as if Covid was the new normal,” Mr. McCarthy said.

Mr. Foley has said the company is acting to improve its profitability and would share details with earnings. The company reported preliminary second-quarter revenue of $1.14 billion and said it ended the period with 2.77 million subscribers.

Peloton’s Pandemic Rise and Fall

Write to Cara Lombardo at cara.lombardo@wsj.com

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Entertainment

Spotify CEO Apologizes to Employees for Joe Rogan, Says He Doesn’t Believe in ‘Silencing’ Him

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Spotify Technology SA Chief Executive

Daniel Ek

apologized to employees for the way

Joe Rogan’s

use of a racial slur in previous podcast episodes has impacted them, saying the situation “leaves many of you feeling drained, frustrated and unheard.”

He said in a letter shared with The Wall Street Journal by a company spokesman that he has no plans to remove the star podcaster from the streaming platform and committed to spending $100 million on music and audio content from what he called historically marginalized groups.

“There are no words I can say to adequately convey how deeply sorry I am for the way ‘The Joe Rogan Experience’ controversy continues to impact each of you,” Mr. Ek said to Spotify staffers on Sunday, referring to Mr. Rogan’s podcast. “Not only are some of Joe Rogan’s comments incredibly hurtful, I want to make clear that they do not represent the values of this company.”

The Spotify executive’s comments doubled down on his statements last week that Spotify is an open platform despite its exclusive deal to distribute Mr. Rogan’s podcast and that excluding Mr. Rogan isn’t the right choice. Mr. Ek’s letter follows Spotify’s acknowledgment that it was delayed in addressing outcry sparked by rocker

Neil Young

over Mr. Rogan’s shows about the Covid-19 pandemic and vaccines.

Mr. Ek said in his letter that Mr. Rogan chose to remove some episodes from Spotify following discussions with the company and Mr. Rogan’s own reflections. Tracking site jremissing.com says 113 of Mr. Rogan’s episodes have been taken off Spotify since Friday.

Mr. Rogan apologized for the second time in a week on Saturday after a compilation video emerged showing how he and some of his guests used the N-word numerous times on his show. In a video on his Instagram account, Mr. Rogan said he offered “my sincere and humble apologies” for “the most regretful and shameful thing that I’ve ever had to talk about publicly.”

In an Instagram video post, Joe Rogan addressed the growing backlash against him and Spotify, which distributes Rogan’s podcast, stemming from accusations that his show spread false information about Covid-19 vaccines. Photo: USA Today Sports/Reuters

He said the clips were taken out of context and that they were based on 12 years of conversations. He added that they look “horrible, even to me.”

The influence Mr. Rogan’s show has and how much responsibility Spotify has for its content has generated significant attention in recent days. Several artists, including Mr. Young,

Joni Mitchell

and

Graham Nash

have said they want to remove their content from Spotify for what they deem is misinformation about the Covid-19 pandemic and vaccines spread by Mr. Rogan.

Singer-songwriter

India Arie

said she pulled her music from the platform because she opposed the language Mr. Rogan used around race and the amount of money he makes from Spotify. She shared the compilation video of Mr. Rogan using a racial slur in numerous instances on his show, which sparked the latest outcry.

“While I strongly condemn what Joe has said and I agree with his decision to remove past episodes from our platform, I realize some will want more. And I want to make one point very clear—I do not believe that silencing Joe is the answer,” Mr. Ek said. “We should have clear lines around content and take action when they are crossed, but canceling voices is a slippery slope. Looking at the issue more broadly, it’s critical thinking and open debate that powers real and necessary progress.”

Last week Spotify publicized its content policies and created advisories for pandemic-related shows that send listeners to an information hub about Covid-19.

In 2020, Spotify paid $100 million, according to people familiar with the deal, to host “The Joe Rogan Experience” exclusively on its platform. The podcast has been critical to Spotify’s growth and expansion beyond music streaming. Mr. Ek repeated in his letter to staffers that he wants the company to be the biggest audio platform in the world.

Spotify’s response comes as companies increasingly are being forced to address backlash stemming from content appearing on their platforms.

Netflix Inc.

late last year responded to the outcry over a

Dave Chappelle

stand-up special that some employees said was offensive to the transgender community.

At the time, Netflix Co-Chief Executive and Chief Content Officer

Ted Sarandos

issued a companywide email defending the special and saying the service wouldn’t pull it down. Mr. Sarandos said the company works hard to support creative freedom and this means “there will always be content on Netflix some people believe is harmful.” He also said he didn’t think the special incites hate or violence.

“The Joe Rogan Experience” is the No. 1 show in 93 markets, Spotify has said. In 2021, Mr. Rogan’s show was the most-listened-to podcast every month in more than 30 markets, including in the U.S., said a person familiar with the matter. Mr. Rogan’s listeners have grown by 75% from the time he joined Spotify’s platform in September 2020 to December 2021, the person said.

Mr. Ek said that having an open platform was a core value of Spotify and that disputes were inevitable. Still, he said, the company could do more to elevate creators from underrepresented communities and diverse backgrounds.

News Corp’s Dow Jones & Co., publisher of The Wall Street Journal, has a content partnership with Spotify’s Gimlet Media unit.

Spotify, Neil Young and Joe Rogan

Write to Steven Russolillo at steven.russolillo@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Business

Disappointing Meta, PayPal Earnings Send Shudders Through Stock Market

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Facebook’s parent company shed more than $230 billion in market value Thursday, a one-day loss that would be the biggest ever for a U.S. company and increase the pressure on a stock market long powered by technology shares.

The setbacks reflect the increased scrutiny companies are under as major U.S. stock indexes remain near record highs and the Federal Reserve is preparing to raise interest rates for the first time since 2018. Rising rates tend to reduce the multiples that investors are willing to pay for a share of company profits, a trend that stands to mean pain for stocks that are already trading at lofty valuations.

That has put heightened pressure on the companies to show their financial results justify their price tags. In recent days, several have fallen short, raising concerns among investors that further declines in major indexes could lie ahead.

“The level of forgiveness has gone down,” said

Daniel Genter,

chief executive and chief investment officer at RNC Genter Capital Management. “When boards come to their shareholders to confess their sins, they’re just not going to be pardoned with one Hail Mary.”

Some strategists say the recent slide in shares of speculative tech companies should serve to remind investors that a robust market rally relies on advances by a variety of stocks. And they warn they expect more big stock swings ahead at any hint of slowing growth.

“The market can’t just be driven by a small number of megacap companies or tech companies,” said

Yung-Yu Ma,

chief investment strategist at BMO Wealth Management. “There should start to be more of a recognition that it’s not going to be technology that leads us out of this pullback.”

Earnings season had been overshadowed until recent days as investors fretted over the Fed’s plans to raise rates. They sold stocks across sectors, helping to send the S&P 500 down 5.3% in January, its worst monthly performance since the March 2020 slump.

The market briefly stabilized this week—with all three major stock indexes rising for four consecutive sessions—before tumbling again Thursday. The S&P 500 dropped 2%, while the tech-heavy Nasdaq Composite fell 3.1%.

All eyes have now turned to

Amazon.com Inc.,

which reports after the closing bell. The e-commerce company warned in late 2021 of a challenging end of the year as it confronted global supply-chain problems.

Amazon shares dropped more than 7% ahead of the report, while shares of speculative tech stocks like

Snap Inc.

and

Pinterest Inc.

also tumbled. Snap fell 24%, while Pinterest declined 10%.

The giant stock moves show how serious investors have become about demanding that companies deliver on their promises for growth after a steep and swift climb in share prices.

Meta, PayPal and Spotify entered 2022 at rich valuations. While the S&P 500 ended December trading at 21.5 times its projected earnings over the next 12 months, Meta was trading at 23.6 times, PayPal at 36 times and Spotify at 543.9 times, according to FactSet. Spotify isn’t an index constituent.

By Wednesday, Meta’s multiple had pulled back to 22.6 times forward earnings, while PayPal traded at 27.2 times, and Spotify at 287.6 times.

“Those stocks were really priced way beyond perfection,” Mr. Genter said. “People are saying, well, guess what, perfection is not here.”

The Facebook parent company surprised investors late Wednesday with a deeper-than-expected decline in profit and a downbeat outlook. The company said it expects revenue growth to slow and shared that it lost about one million daily users globally. Shares declined 27%, on course for their worst daily performance since they started trading in 2012.

The company’s challenges include a new ad-privacy policy from Apple Inc. that Meta expects to cost it more than $10 billion in lost sales for 2022. The requirement that apps ask users whether they want to be tracked limited the ability to gather data used to target digital ads, driving advertisers to change their spending.

Meta’s $234 billion drop in market value is set to exceed the record that Apple Inc. set in September 2020 when the iPhone-maker lost about $182 billion in a single day, according to Dow Jones Market Data.

PayPal lowered its profit outlook for 2022 and abandoned a target it set last year of roughly doubling its active user base. Executives said business this year will be pressured by forces including inflation, supply-chain problems, the Omicron variant and the runoff in government stimulus. Shares slumped 25% Wednesday in their worst selloff on record and continued sliding Thursday.

PayPal Holdings lowered its profit outlook.



Photo:

Justin Sullivan/Getty Images

And Spotify, which is embroiled in a controversy over

Joe Rogan’s

podcast, said it added users but declined to give annual guidance, pulling shares down 16% on Thursday.

Earnings results out of the tech segment haven’t been all bad. Google parent

Alphabet Inc.

reported robust sales growth and unveiled plans for a stock split this week, helping the company add more than $135 billion in market value Wednesday.

Alphabet has outperformed the other stocks in the popular FAANG trade lately. Its shares are about flat this year, while Meta, Amazon and

Netflix Inc.

are down by double-digit percentages.

Apple Inc.

is off modestly.

Broadly, the corporate earnings season has surpassed expectations. With results in from about half the constituents of the S&P 500, analysts estimate that profits from index constituents rose 26% in the holiday quarter from a year earlier, according to FactSet. That is up from forecasts for 21% growth at the end of September.

Money managers, though, say they have been particularly focused on what company executives have to say about their expectations for the coming months in the wake of higher rates and the continuing Covid-19 pandemic.

“Not too many of them are painting a rosy picture because of the uncertainty,” said

Robert Schein,

chief investment officer at Blanke Schein Wealth Management.

How the Biggest Companies Are Performing

Write to Karen Langley at karen.langley@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Entertainment

Joe Rogan Apologizes, Spotify Publishes Content Policy in Response to Neil Young Outcry

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Joe Rogan, responding to Neil Young’s objections to his podcast and host Spotify, said his show has grown “out of control” and pledged to be more balanced and informed about controversial topics and guests.

In a late Sunday evening 10-minute Instagram video post, Mr. Rogan said, “If I pissed you off, I’m sorry,” referring to growing backlash against him and Spotify Technology SA stemming from the folk rocker’s accusations that they spread false information about Covid-19 vaccines through the popular podcast.

“It’s a strange responsibility to have this many viewers and listeners,” said Mr. Rogan. “It’s nothing that I’ve prepared for. I’m going to do my best to balance things out.”

Mr. Rogan said he will have more guests on the show that present different opinions from contrarian ones right after he hosts controversial guests. He thanked Spotify for their support and said he’s a huge Neil Young fan.

Spotify earlier Sunday made public its policies, which it didn’t alter, and created a Covid-19 information hub in response to folk-rocker Neil Young removing his music last week from the streaming service. Mr. Young said he objected to Mr. Rogan and particularly his podcasts about the pandemic and vaccines. His action sparked others, including folk singer

Joni Mitchell,

to do the same.

“We haven’t been transparent around the policies that guide our content more broadly,” said Chief Executive Daniel Ek in a blog post Sunday. “It’s become clear to me that we have an obligation to do more to provide balance and access to widely accepted information from the medical and scientific communities guiding us through this unprecedented time.”

Spotify isn’t at this time removing any of Mr. Rogan’s episodes that detractors have highlighted in recent weeks as spreading what they deem misinformation about Covid-19 vaccines, said a person familiar with the matter.

Spotify’s platform rules define what it considers to be dangerous, deceptive, sensitive and illegal content. It says creators who break its rules could face consequences including their work being removed.

The steps highlight growing pains for Spotify as it contends with the types of pitched political debates that many large content companies face. It dove into podcasting over the past few years to expand beyond music and become more profitable, and its role as the distributor of popular albeit polarizing voices like Mr. Rogan’s has brought new challenges.

The company’s stance shows it is resolute about keeping its stated commitment to open dialogue, and its lucrative relationship with certain podcasters, while responding to concerns of various creators and customers on which it relies.

“They can have Rogan or Young. Not both,” Mr. Young wrote in a letter he posted on his website last week. Spotify struck a deal with Mr. Rogan in 2020 worth more than $100 million, according to people familiar with the matter.

Musician Joni Mitchell said she decided to remove her music from Spotify in support of Neil Young’s protest.



Photo:

Reuters

Over the weekend, Ms. Mitchell and rocker Nils Lofgren joined Mr. Young in seeking to remove their music, they said. Podcaster and professor Brené Brown said she wouldn’t produce more for the service “until further notice,” and the production company of

Prince Harry

and Meghan, the Duke and Duchess of Sussex, called Archewell Productions, said it has been expressing concerns to Spotify about Covid-19 misinformation on its platform.

“We know we have a critical role to play in supporting creator expression while balancing it with the safety of our users,” said Mr. Ek in the blog post Sunday. “In that role, it is important to me that we don’t take on the position of being content censor while also making sure that there are rules in place and consequences for those who violate them.”

Podcaster Brené Brown has said she wouldn’t produce more content for the streaming service ‘until further notice.’



Photo:

Jack Plunkett/Invision/Associated Press

As of Sunday, Spotify is beginning to tag Covid-19-related content with an advisory prompting users to check out the service’s new “hub for data-driven facts and up-to-date information” from the health and scientific communities.

Mr. Rogan applauded the initiative, saying he thought the advisories are a good idea.

Mr. Young in his initial letter cited an episode of Mr. Rogan’s podcast in which the podcaster spoke with Dr. Robert Malone, a virologist who worked on research into several mRNA Covid-19 vaccines but who is now critical of the treatments. Among the claims made was the suggestion that hospitals have been financially motivated to falsely determine that deaths had been caused by Covid-19.

Earlier this month, a group of 270 scientists and healthcare professionals signed an open letter to Spotify accusing the podcast of “promoting baseless conspiracy theories” and asking the service to take action against mass-misinformation events on its platform.

While more than 40 of Mr. Rogan’s episodes have been previously removed for policy violations, none of them have been related to the pandemic, according to a person familiar with the matter.

Mr. Young has since posted more on the topic, encouraging other artists to join him and steering his listeners to other music streaming platforms.

Keith Tate,

a fan of Mr. Young and Ms. Mitchell, canceled his Spotify subscription. The 65-year-old from Houston said his son added him to his YouTube music account. “Works great and Neil Young is there and Joe Rogan is not,” he said.

Mr. Tate owns a company that manufactures high-end basketball equipment, where he hasn’t mandated but encouraged employees to get the Covid-19 vaccines.

“It was amazing how much disinformation there was,” he said. “It took quite a bit of encouragement. I think they all were looking for honest information.”

Mr. Tate said every person in his company is fully vaccinated and boosted now.

Mr. Rogan also thanked both his listeners and detractors. “It’s good to have some haters,” Mr. Rogan said.

Spotify’s Mr. Ek said there are opinions on both sides of any issue and that he personally disagrees with plenty of individuals and views on Spotify.

“To our very core, we believe that listening is everything,” he said.

Dow Jones & Co., publisher of The Wall Street Journal, has a content partnership with Gimlet Media, a unit of Spotify.

The Unfolding of the Spotify Controversy

More coverage of artists pulling their music from the streaming service, selected by the editors

Write to Anne Steele at Anne.Steele@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Entertainment

Neil Young Demands Spotify Remove His Music Over Joe Rogan’s Vaccine Comments

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Neil Young

has demanded that

Spotify Technology SA

SPOT -4.92%

remove his music due to what he says is vaccine misinformation spread by podcaster

Joe Rogan

on the streaming service. The folk-rock star and his record label were in discussions over the matter Tuesday, according to people familiar with the matter.

Mr. Young, whose hits including “Heart of Gold” and “Harvest Moon” have gained hundreds of millions of plays on Spotify, wrote an open letter to his manager and record label criticizing Mr. Rogan and Spotify. “I am doing this because Spotify is spreading fake information about vaccines—potentially causing death to those who believe the disinformation being spread by them,” he wrote. The letter has since been removed from his website.

Mr. Young didn’t respond to requests for comment.

The letter came in response to “The Joe Rogan Experience” podcast, which is currently Spotify’s most popular podcast and also tops

Apple’s

podcasting charts. In 2020, Mr. Rogan signed an exclusive podcasting deal with Spotify, worth more than $100 million, according to people familiar with the matter.

Joe Rogan has used his podcast to discuss Covid-19 vaccines and restrictions.



Photo:

Carmen Mandato/Getty Images

“With an estimated 11 million listeners per episode, JRE, which is hosted exclusively on Spotify, is the world’s largest podcast and has tremendous influence. Spotify has a responsibility to mitigate the spread of misinformation on its platform,” Mr. Young wrote in the letter. “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.”

While Mr. Young’s label,

Warner Music Group Corp.

’s Warner Records, is the licensor to Spotify and may legally have control over how and where his music is distributed, it is typical for a record company to take an artist’s wishes into account. An act of Mr. Young’s cachet in particular tends to have more control over their career and creative output. If a decision is reached to remove the music, Spotify could take it down in a matter of hours, according to people familiar with the matter.

Streaming accounts for 84% of recorded music revenue in the U.S., according to the Recording Industry Association of America. Spotify is by far the largest music-streaming service by paid subscriptions.

Mr. Young’s letter cited an episode of the podcast in which Mr. Rogan spoke with

Dr. Robert Malone,

a virologist who worked on research into several mRNA Covid-19 vaccines but who is now critical of the treatments. Among the claims made was the suggestion that hospitals have been financially motivated to falsely diagnose deaths as having been caused by Covid-19.

Mr. Rogan has regularly used his podcast to discuss Covid-19 vaccines and restrictions, railing against vaccine mandates for indoor events and suggesting that young, healthy people shouldn’t be vaccinated.

Spotify’s bet on Mr. Rogan’s show has caused trouble in the past for the audiostreaming company. Some employees expressed concern over the podcast’s content during a town-hall meeting in September 2020, relating to material they felt was anti-transgender, according to people familiar with the matter.

The company stood by its star podcaster, with Chief Executive

Daniel Ek

saying that the ambition to make Spotify the “largest audio platform in the world” involves embracing diverse voices and differing opinions as the company chases scale in podcasting.

“The most important thing for us is to have very clear policies in place,” he said in an interview a month after the town hall. “It doesn’t matter if you’re Joe Rogan or anyone else, we do apply those policies and they need to be evenly applied.”

Amid a surge in cases, some countries are handing out second booster shots. In Israel, early data suggest a fourth vaccine dose can increase antibodies against Covid-19, but not enough to prevent infections from Omicron. WSJ explains. Photo composite: Eve Hartley/WSJ

Earlier this month, a group of 270 scientists and healthcare professionals signed an open letter to Spotify accusing the podcast of “promoting baseless conspiracy theories” and asking the service to take action against mass-misinformation events on its platform.

“Throughout the COVID-19 pandemic, Joe Rogan has repeatedly spread misleading and false claims on his podcast, provoking distrust in science and medicine,” it said.

Since the start of the pandemic, Spotify has removed over 20,000 Covid-related podcast episodes as a result of creators violating its policies, according to a person familiar with the matter. While more than 40 of Mr. Rogan’s episodes have been removed, none of them have been related to the pandemic, this person said.

Mr. Young also launched his own streaming service in 2018 called the “

Neil Young

Archives,” which offers different yearly subscriptions ranging from $19.99 to $99.99 to access the artist’s albums.

Mr. Young has previously had issues with streaming platforms. In 2015, he said he didn’t need his content “to be devalued by the worst quality in the history of broadcasting or any other form of distribution” and that he was pulling his music from streaming services. The artist’s music returned to Spotify in 2016. “That’s where people get music,” he later told Rolling Stone.

Monday’s letter wasn’t the first time the outspoken 76-year-old has used his website to take on big companies in the music business. Last summer, Mr. Young criticized concert promoters in a post, calling live shows super-spreader events and wondering why more artists weren’t canceling shows.

—Allison Prang contributed to this article.

Write to Anne Steele at anne.steele@wsj.com and Gareth Vipers at gareth.vipers@wsj.com

Corrections & Amplifications
Some Spotify employees expressed concern over the content of Joe Rogan’s podcast during a town-hall meeting in September 2020. An earlier version of this article suggested that the town-hall meeting took place last September. (Corrected on Jan. 25)

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Bitcoin, Netflix, Peloton, Coinbase: What to Watch When the Stock Market Opens Today

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Stock futures are falling after disappointing earnings reports from some popular technology stocks. Here’s what we’re watching at the end of a rough week on Wall Street:

  • Bitcoin’s price fell below $40,000, and crypto stocks were dragged down with it.

    Coinbase

    COIN 0.97%

    dropped 5.6% ahead of the bell, and bitcoin miners

    Marathon Digital

    MARA -0.08%

    and

    Riot Blockchain

    RIOT -0.11%

    slid 7.8% and 8.7% respectively.

  • Netflix

    NFLX -1.48%

    plunged 19% premarket. The streaming giant said it expects to add a much smaller number of subscribers this quarter than it did a year ago as it adjusts to growing competition and lasting disruptions from the coronavirus pandemic. The bad news seemed to rub off on streaming-device maker Roku, which shed 4% premarket.

  • Peloton

    PTON -23.93%

    powered 5.5% higher premarket, but that only makes up a bit of Thursday’s 24% drop. The company is reviewing the size of its workforce and resetting production levels as it adapts to more seasonal demand for its exercise equipment.

A Peloton stationary bike at one of the fitness company’s studios in New York, Dec. 4, 2019.



Photo:

Scott Heins/Getty Images

  • Intel

    INTC -2.95%

    nudged down 0.2%. The company plans to invest at least $20 billion in new chip-making capacity in Ohio.

  • CSX

    CSX -0.03%

    fell 3.2%, though the railroad operator is projecting that shipping volume will rise faster than GDP this year and reported a slight earnings beat.

  • Ally Financial

    ALLY -0.02%

    shares slipped 2.4% premarket after it reported lower earnings per share during the recent quarter from a year prior.

  • Huntington Bancshares

    HBAN -2.51%

    ticked down 4.5% after it also reported a slight drop in earnings per share.

Chart of the Day
  • Europe’s tech scene has struggled to emerge from the shadows of giants in the U.S. and Asia, but friendly local policies and a global overflow of investment capital are now giving the region a gusher of cash.

Write to James Willhite at james.willhite@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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