Spotify is set to increase subscription prices in dozens of nations this summer as it transitions from aggressive growth to strong profitability, according to individuals with knowledge of the situation. The increase comes as the music industry's growth slows and record labels increasingly pressure streaming platforms to get more value out of them, the Financial Times has reported.
Price increases to start in Europe and Latin America
The increased prices will cost around €1 per individual subscription in most European and Latin American markets, with the changes coming as soon as June. Spotify has previously already instituted quiet price increases in the Netherlands and Luxembourg. But prices in the United States — Spotify's biggest market — won't change for the time being, after a price hike in July 2024.
Music industry seeks improved returns
The industry has long claimed that streaming services have been undersold relative to video services like Netflix, particularly considering that subscription prices have increased much more slowly than inflation. In the US, Spotify still costs only $11.99 a month, a modest increase from $9.99 when it entered the market 14 years ago.
Move to 'Streaming 2.0' and super-premium tiers
The imminent price hikes follow as the period of runaway growth in music streaming begins to slow. Global music revenues grew at half the rate last year versus earlier years, prompting demands for a "Streaming 2.0" model that addresses passionate fans with higher-priced, premium offerings, reports the IFPI trade association.
Spotify is testing a new "super-premium" level that would cost around $6 more per month in the US, in addition to the standard $11 charge. The premium level would allegedly include first access to new music releases and concert tickets, as a way to profit off superfans willing to pay a premium for exclusivity. Other industry giants — Apple Music, Amazon Music, and YouTube Music — are reportedly mulling comparable premium tiers.
Fears regarding consumer response
Yet company leaders warn plans for premium service are still flexible and subject to alteration. While the industry finds its way into "Streaming 2.0," doubts surround whether consumers will be willing to pay more after a decade listening to all music of the world for around $10 a month. Analysts warn that corporations will need some incentive — possibly exclusive early release — to coax customers into upgraded pricing.
A robust year for Spotify shares
Spotify's financial results have improved significantly over the past year, as its shares have more than doubled due to regular profits and growth in subscribers. The company reports its most recent earnings on Tuesday, and the investors will look closely for hints of how premium strategy and price hikes are to affect future revenues.
Streaming's next chapter begins to take shape
As Spotify and its rivals prepare for this next chapter of streaming, the music industry's next move is coming into focus — and it will probably be one that requires listeners to pay more for the music they adore.
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