Spotify’s share price increased yesterday following the news that the streaming service is instigating another round of price increases in multiple markets, reversing some of the share price decline seen last week following the publication of the company’s latest quarterly earnings report.
Both investors and the music industry like the now semi-regular subscription price increases - which, so far, haven’t resulted in any major drop in subscriber numbers - and would generally like to see more of them.
In a statement yesterday, Spotify said “we occasionally update our prices” and “over the next month, premium subscribers in multiple markets across South Asia, the Middle East, Africa, Europe, Latin America and the Asia-Pacific region will receive an email explaining what this update means for their subscriptions”.
As an illustration, it then provided a sample subscriber email for one European market where the price is due to go up from €10.99 to €11.99.
Semi-regular price increases have become the norm in music streaming in recent years, after fifteen years during which the baseline price was pretty much fixed at 9.99 per month in more mature markets. Which meant that, when inflation was taken into account, the monthly subscription price was actually going down.
Because the deals between Spotify and the music industry are revenue share deals, record labels and music publishers were as keen as the streaming service’s investors to see the baseline price increase from 9.99 in more mature markets, long before Spotify finally started introducing wide-ranging price increases in 2023.
Like with all streaming services, the cost of Spotify subscription varies greatly from country to country, based on an assortment of local economic factors, which also impact on the streaming service’s decisions around price rises. Interestingly, for the first time this round of price hikes includes a change to subscription pricing in India, a key growth market.
According to India Today, the new price is already in force there, so that a premium subscription now costs Rs139 a month, up from Rs119 - so an increase from about £1.02 to £1.19 at the current exchange rate. The family plan has seen the biggest price rise in India, from Rs179 to Rs229, a 28% increase.
According to Bloomberg, Spotify’s Chief Business Officer Alex Norström discussed price increases on a call with investors last week, saying that the company now basically “raises prices all the time”, but only when “it’s appropriate for the business”. As for whether or not that results in subscriber cancellations, or ‘churn’, Norström added, “on churn, we didn’t see anything out of the ordinary for Spotify”.
The latest round of price hikes follows last week’s earnings report for quarter two, which, Bloomberg notes, saw Spotify - now generally a profitable company - “swing to a loss due to higher-than-expected expenses related to employee compensation”.
CEO Daniel Ek also admitted that the company’s ad sales - crucial for its free tier and podcasts business - were not meeting expectations, with the firm’s VP Of Global Advertising, Lee Brown, stepping down.
That slightly disappointing update resulted in a dip in the Spotify share price last week, which has now been partly reversed thanks to the market’s response to the price increases.
Although, despite last week’s developments, at $658.59 this morning, Spotify’s share price is still pretty healthy, and a far cry from the company’s lowest ebb in share price terms in 2022 when it dropped to just over $70.