Spotify Plans to Raise Price of Premium Plan in U.S. | Mint

Spotify Plans to Raise Price of Premium Plan in U.S.

Audio and video streaming services alike are under pressure from Wall Street to focus on profitability over user growth. (Photo: Reuters)
Audio and video streaming services alike are under pressure from Wall Street to focus on profitability over user growth. (Photo: Reuters)

Summary

  • Audio company had avoided increase, but faces investor pressure to boost profitability

Spotify Technology plans to raise its monthly subscription price in the U.S. by $1, a long-awaited change by the audio giant as it pushes to become consistently profitable.

Under the planned change, expected to be announced next week, the cost of Spotify’s ad-free premium plan is likely to increase to $10.99 a month in the U.S. from $9.99, people familiar with the matter said. Other price increases are likely to roll out in dozens of markets globally in the coming months.

Spotify is by far the largest music streaming service by subscriptions globally, but has been a holdout among competitors, including Apple, Amazon and YouTube, that have raised their prices in established markets.

The move by Spotify is likely to spur further price increases by its rivals. “It breaks the dam," said Wedbush Securities analyst Daniel Ives, who called the increase overdue.

Audio and video streaming services alike are under pressure from Wall Street to focus on profitability over user growth. A number of video streaming services, including Peacock and Disney+, have raised prices in recent months.

Shares in Spotify, which has said it plans to raise prices this year to match competitors, are up 110% so far this year. The stock closed down less than 0.5% Friday and was flat in after-hours trading.

Since the introduction of Spotify and other streaming services a decade and a half ago, $9.99 or €9.99 a month has been the standard price for an individual subscription, giving users access to essentially all of the world’s music.

Spotify’s premium plan allows a single user to listen ad-free on and offline. The company charges more a month for additional users.

For years, music executives have urged streaming services to not only increase their basic monthly price, but also explore other pricing options and tiers to draw more paying users and, in doing so, create more of a windfall for labels and artists.

YouTube on Thursday increased the price of an individual music streaming plan to $10.99 a month. Apple last October raised the price of its individual plan by $1 and its family plan—previously $14.99 a month for up to six users—by $2. Amazon similarly increased its prices in January.

Spotify began raising the price of its family plan, which also allows up to six users, over a year ago in dozens of markets, including the U.S. That move has helped increase the revenue per user that Spotify makes.

The company has said such price increases haven’t affected churn or customer intake.

Warner Music Chief Executive Robert Kyncl said on a May call with investors that Spotify would generate $1 billion in revenue by raising the price of its U.S. subscription by $1. Recent price increases by other companies are a move in the right direction but should just be the first step, he said.

“Those subscription services which have raised prices have done the fiscally prudent thing—for themselves, their shareholders and the creative community—and there is no sign that they are seeing elevated churn," he said.

Write to Anne Steele at anne.steele@wsj.com

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