On Spotify’s price increase

by | Jul 25, 2023

⬆️ Spotify raises its subscription price by $1.

Its first price hike since 2011. That’s remarkable price stability over the past decade.

💸 Apple Music & YouTube Music recently increased prices, too. I don’t think this is the end of price hikes across the industry. Expect more increases in the coming year, as Wall Street looks for more profitability from streaming services.

So, who benefits from the hike? 🤔

➕ Spotify (duh) – Despite impressive growth, the company still isn’t profitable. It’s trying to boost profitability. The company is pushing towards its goal of 1 billion subscribers by 2030 and targeting markets like China, India, ASEAN.

➕ Major labels – JPMorgan believes the price hike may boost revenue estimates 1% for Warner Music Group (+2% income). In addition, Spotify has made regulatory filings that it has reached license agreements apparently with labels that guarantees spend commitments over $4 billion in coming years.

🤔 Artists – Hard to tell. The increased fee is unlikely to translate into a material increase in royalties for artists. But a more profitable Spotify might lead to product innovation that helps boost engagement. It isn’t popular to give Spotify the benefit of the doubt, but let’s see how the company’s service and features improve in the coming months…

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