Spotify Technology, a major player in the music streaming arena, has announced plans to increase its subscription prices and introduce a new basic tier. This decision will affect five countries, including the UK, Australia, and Pakistan. The rate hike is expected to be implemented by the end of April.
Spotify’s decision to raise its prices has resulted in a surge in its shares, which rose by more than 5% on the day of the announcement. The company, which competes with other popular music streaming services such as Apple and Amazon, has decided to raise its prices in the United States later this year, making it its largest territory to face a price increase.
In addition to the price increase, Spotify is also introducing a new basic tier. This tier will offer music and podcasts but not audiobooks, at the current $11 monthly price of an individual premium plan. This is the first of several new pricing options that Spotify plans to introduce.
With the new pricing, individual plans will increase by about $1 a month while family plans and duo plans for couples will rise by $2. On a monthly basis, the company offers premium plans including $10.99 for an individual, $14.99 for duo, and $16.99 for a family in the US, as per the company’s website.
“Spotify declined to comment on the report.”
CEO Daniel Ek mentioned earlier in February that the company has “plenty of levers to pull, including price increases”. According to him, the investments in podcasts were a drag on the business in 2023. Spotify offers an advertising-supported free service with limited features and a subscription-based paid service that gives access to all its functionality. The majority of its revenue comes from premium subscribers.
A potential price hike could help push for profitability at the company that is expecting strong growth in subscribers. Spotify in February forecast a near 14% jump in premium subscribers to 239 million in the current quarter, which was above estimates of 238.3 million.
The company has introduced offerings including podcasts and audiobooks in a bid to cut reliance on the music industry and gain more users. It has content licensing deals with firms such as Universal Music Group, Sony Music Entertainment, and Warner Music Group. Content from these companies accounts for about 74% of audio content streamed on Spotify’s platform as of Dec 31.
