One of the main reasons cited for the price hikes is the cost of audiobooks, which Spotify introduced last year. Indeed, the company has quickly become the second-largest player in the audiobook market, behind Audible, and is rapidly expanding its efforts into new countries, even as you read this article. However, as we explain later, other external forces might also be at work.
Adjusted Subscription Tiers
So, while the actual premium plan is going above $10.99 (individual) and $16.99 (family) sometime in the future, these original price plans will now be offered as a new “basic” plan. It will have access to regular music and podcasts but would exclude audiobooks completely (as opposed to providing limited access). You need to subscribe to the more expensive plans later to retain all original features.
Additionally, Spotify might even be planning to roll something of a “deluxe” plan, offering high-fidelity audio streaming and other premium features in the style of similar competitors like TIDAL. Recent sightings of a Dolby Atmos logo on the app’s Now Playing screen suggest that spatial audio could be a bonus feature in this suggested package.
Industry Pressure
Music industry executives have called for streaming services to raise prices in the last few years. For one thing, the cost of individual subscription plans has not kept pace with inflation. According to Warner Music Group CEO Robert Kyncl via Billboard, music is now the form of entertainment with the lowest cost, yet ironically having the highest engagement and fan factor among consumers.
The same set of reports also generally estimated that a 10% price increase across all music subscription services would result in significant revenue gains for major labels. For example, Universal Music Group potentially sees a $430 million increase, and Warner Music Group a $256 million boost. This might have also given Spotify enough momentum to decide on multiple price adjustments over just a few months.
More Trend Justification
On more official grounds, the company previously justified Spotify’s preliminary move to raise prices in 2023 as a necessary step to “continue innovating” and “delivering value” to fans and artists on the platform. After all, Spotify now boasts more than 600 million users worldwide.
Whether its goal was true or not, the move raked in a good amount of revenue growth (about 11%) by the third quarter of that same year, albeit slightly offset by an operating cost of $80 million by the end of 2023.
Then again, competitors like Apple Music and YouTube Premium have raised prices even without internal financial challenges in recent years. Spotify would be hard-pressed not to take the huge opportunity at least, especially in light of the advantages across the industry mentioned earlier.
