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Business News Digital
Spotify to test price increase in Norway
By Andy Malt | Published on Friday 27 April 2018
How will streaming services ever make money? Pushing down the royalties it pays to the music industry is one thing Spotify is already pursuing. But how about a price increase for subscribers too? The market leader is about to test out that idea as well.
According to Bloomberg, Spotify will implement a 10% price increase for new subscribers in Norway next month, before extending the price rise to existing customers in July. The increase will apply to the company’s family plan and discounted student offer, as well as its standard subscription package.
“In order to meet market demands and conditions, while continuing to offer a great personalised service, Spotify will be increasing the price of our premium subscription in Norway”, the company said in a statement.
The streaming business model is as yet unproven, with all the key players, including Spotify, still currently loss-making. Spotify’s ultimate aim is to keep at least 30% of its revenues, handing over up to 70% to rightsholders. Currently it hands over more like 85% because of minimum guarantee commitments. This, coupled with high overheads and aggressive growth, results in significant losses.
Under their more recent licensing deals, the record labels did agree to slightly lower the royalties they receive, if certain growth targets are reached. However, with music publishers concurrently pushing their royalties up and many premium users on heavily discounted packages or introductory offers, the company arguably needs to pursue other tactics to assure long-term profitability. A slight price increase is one such tactic.
It will now be interesting to see if the price increase affects new sign up numbers in Norway next month. And even more interesting will be the subsequent testing of the loyalty of existing customers, as Spotify’s prices rise above those of its competitors.
Norway has reportedly been selected for the test because the majority of users there pay for their subscription.
