In an effort to boost revenue and cut losses, Spotify has announced a price increase for its premium paying subscribers. The new monthly cost for US users will be $10.99, bringing Spotify in line with rivals Apple Music and Amazon Music, both of which raised their prices last year. YouTube Music, which has gained significant popularity in the space, remains slightly cheaper at $9.99 per month.
In addition to the price increase for individual plans, Spotify is also raising prices for its Premium Duo, Family, and Student plans. The Premium Duo plan will increase by $2 to $14.99 per month, while the Family and Student plans will rise by $1 to $16.99 and $5.99, respectively.
Spotify explained the price increase by stating, “The market landscape has continued to evolve since we launched. So that we can keep innovating, we are changing our Premium prices across a number of markets around the world. These updates will help us continue to deliver value to fans and artists on our platform.”
Despite having 210 million global paying subscribers and 515 million monthly active users as of March 31, Spotify has been operating at a loss and has been seeking ways to cut costs. The company reported a “very modest underperformance in advertising” revenue in its first quarter of 2023. This price increase is seen as a means to increase monetization and cut losses.
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The move will likely be welcomed by Spotify’s major label partners, such as Universal Music Group and Warner Music Group, as increased monetization of streaming audio from their artist rosters benefits these labels. Spotify pays 70% of subscription and advertising fees to rightsholders, and the major labels account for 75% of all record label audio streams on the platform according to Spotify’s annual report.
To further cut costs, Spotify has made organizational changes and reductions in staffing. In January, the company announced a plan to lay off 600 employees, followed by the consolidation of its podcast divisions and the cutting of 200 jobs in June. Spotify’s CEO, Daniel Ek, described these efforts as a need to become more efficient.
In terms of innovation, Spotify has unveiled a redesigned home feed in March that gives more prominence to video, aiming to become a destination for creators and podcasters. The company has also introduced an “AI DJ” feature that uses artificial intelligence to curate personalized playlists for users based on their music taste.
While Spotify has ended some exclusive talent deals, including those with Meghan Markle and Prince Harry, and Barack and Michelle Obama, the company continues to invest in podcasting. Spotify recently announced a new weekly podcast with Trevor Noah, although the show will be available on multiple audio services.
Spotify’s stock price has experienced significant growth, doubling over the first six months of the year. The company is set to announce its second-quarter earnings on July 25.
Overall, Spotify’s price increase for its premium plans reflects its efforts to improve financial sustainability and increase revenue. The move also aligns the company with its competitors in the music streaming space. With a large user base and continued innovation, Spotify aims to deliver value to fans and artists while cutting costs and reducing losses.
