Spotify to Increase US Subscription Price, Breaking the Dam for Audio Streaming Services
Key Highlights :
Audio streaming services have long been held to a standard $9.99 or €9.99 a month price for an individual subscription, providing users access to essentially all of the world’s music. But now, Spotify Technology is set to break the dam and raise its monthly subscription price in the U.S. by $1, a long-awaited change by the audio giant as it pushes to become consistently profitable.
The move by Spotify is likely to spur further price increases by its rivals. Apple, Amazon, and YouTube have already raised their prices in established markets, and now Spotify is following suit. The cost of Spotify’s ad-free premium plan is likely to increase to $10.99 a month in the U.S. from $9.99, people familiar with the matter said. Other price increases are likely to roll out in dozens of markets globally in the coming months.
Streaming services are under pressure from Wall Street to focus on profitability over user growth. A number of video streaming services, including Peacock and Disney+, have raised prices in recent months, and Spotify’s increase is likely to encourage others to do the same.
Since the introduction of streaming services a decade and a half ago, the standard price for an individual subscription has remained the same. Music executives have urged streaming services to not only increase their basic monthly price, but also explore other pricing options and tiers to draw more paying users and, in doing so, create more of a windfall for labels and artists.
Spotify began raising the price of its family plan, which also allows up to six users, over a year ago in dozens of markets, including the U.S. That move has helped increase the revenue per user that Spotify makes. The company has said such price increases haven’t affected churn or customer intake.
Warner Music Chief Executive Robert Kyncl said on a May call with investors that Spotify would generate $1 billion in revenue by raising the price of its U.S. subscription by $1. Recent price increases by other companies are a move in the right direction but should just be the first step, he said.
Spotify is by far the largest music streaming service by subscriptions globally, and its increase is likely to influence its competitors. Shares in Spotify, which has said it plans to raise prices this year to match competitors, are up 110% so far this year. The stock closed down less than 0.5% Friday and was flat in after-hours trading.
With Spotify’s upcoming price increase, audio streaming services are likely to follow suit and raise their prices as well. This is a long-awaited move by the audio giant as it pushes to become consistently profitable, and it is likely to have a ripple effect across the industry.