To bolster revenue and mitigate losses, Spotify has officially announced a price increase for its premium-paying subscriber base.
Starting immediately, the new monthly cost for U.S. users will be $10.99, aligning Spotify with competitors Apple Music ($10.99 a month) and Amazon Music ($10.99 for non-Prime members, though cheaper for Prime members), raising their prices last year. This move comes shortly after YouTube Music raised its price to $10.99 monthly.
Notably, the Premium Duo plan will see a $2 increase, now priced at $14.99 per month, while the Family and Student plans will rise by $1 to $16.99 and $5.99, respectively.
Spotify released a statement explaining the decision: “The market landscape has continued to evolve since we launched. So that we can keep innovating, we are changing our Premium prices across several markets around the world. These updates will help us continue to deliver value to fans and artists on our platform.”
As of March 31, Spotify boasted 210 million global paying subscribers, marking a 15 percent year-over-year increase and 515 million monthly active users. Despite its significant user base, the company has been operating at a loss and exploring ways to cut costs. In the first quarter of 2023, CFO Paul Vogel noted a “very modest underperformance in advertising” revenue.
The price hike is expected to be well-received by Spotify’s major label partners, such as Universal Music Group and Warner Music Group, who benefit from increased monetization of streaming audio from their artists. In 2022, UMG, WMG, Sony Music, and Music and Entertainment Rights Licensing Independent Network accounted for 75 percent of all record-label audio streams on Spotify. It’s worth mentioning that Spotify pays 70 percent of subscription and advertising fees to rightsholders.
To offset losses and improve efficiency, Spotify announced plans to cut 600 employees in January and consolidated its podcast divisions by eliminating 200 jobs in June. CEO Daniel Ek stated that this initiative aimed to make the company more efficient. Additionally, Spotify unveiled a redesigned home feed in March, emphasizing video more to attract creators and podcasters. Moreover, the company ventured into artificial intelligence by introducing an “AI DJ” feature, promising personalized music selection based on users’ tastes.
Despite the efficiency drive leading to the end of some exclusive talent deals, such as those with Meghan Markle and Prince Harry and Barack and Michelle Obama, Spotify recently launched a new weekly podcast with Trevor Noah, which will be available on multiple audio platforms.
On July 25, Spotify will reveal its second-quarter earnings, and it’s worth noting that the company’s stock price has doubled over the first six months of this year.
