At this level, a Spotify value hike within the US isn’t an ‘if,’ it’s a ‘when’. However what if mountain climbing the worth on price-sensitive People is a expensive mistake?
Spotify’s been blasting value will increase throughout dozens of nations this 12 months. Now, it’s America’s flip.
For months, rumblings of a stateside enhance have shifted into a gentle drumbeat — regardless of Spotify’s obvious hesitation to drag the set off. Simply hours in the past, the Monetary Instances was the most recent to report on an upcoming enhance, which, in accordance with the monetary pub, is coming in Q1 of subsequent 12 months (i.e., a couple of months away).
The catalyst for the upcoming hike is — you guessed it — main labels Common, Sony, and WMG, although Wall Road can also be pressuring the DSP to jack their charges. Undoubtedly, Spotify desires a juicier gravy prepare, too.
Certainly, everybody within the music enterprise appears prepared for a Spotify value hike. However is the American shopper?
Regardless of the price-sensitive realities on American soil, Spotify appears to be adopting a cocky tone. “We additionally noticed regular retention charges following the rollout of our latest value will increase throughout greater than 150 markets,” Alex Norström, Spotify’s Chief Enterprise Officer & Co-President, relayed within the firm’s latest quarterly outcomes name. “These outcomes present the facility of the product and the loyalty of our subscribers.”
Norström and different Spotify execs are fast to level to double-digit yearly subscriber beneficial properties worldwide. Take a more in-depth look, nonetheless, and lots of the wealthier, higher-ARPU international locations are exhibiting far slower progress charges, notably america and Western Europe.
Regardless, few international locations have been spared value changes over the previous two years, with a broad swath of Western European international locations receiving latest month-to-month bump-ups.
In some international locations, subscribers had been merely instructed to pay extra for a similar product. In others, they had been cajoled with pointless extras like ‘free’ audiobooks and AI DJs. None had been handed dramatically totally different experiences.
In Sweden, Denmark, Finland, Iceland, and Monaco, for instance, subscribers had been knowledgeable they’d be paying extra in August. Then, this month, Spotify introduced that these subscribers had been getting ‘entry to over 300,000 audiobooks at no further value’ — that’s, excluding the additional value they’ve been paying since August.
All of which raises a essential query: with none ‘there there’ to justify the hiked-up costs, will American subscribers push again?
Monetary stress isn’t distinctive to America, however People are positively feeling price-weary. All of the sudden, ‘affordability’ is a fierce political power within the US, swaying mayoral races and presidential reputation polls alike. Will the grind of steadily rising costs, whether or not for espresso or streaming providers, create some sudden pushback for Spotify?
“America’s center class is weary,” the Wall Road Journal just lately declared, pointing to a big and rising group of People “attempting to find bargains and spending extra rigorously.”
“Despite the fact that the inflation charge is under its latest 2022 excessive, sure necessities like espresso, floor beef, and automotive repairs are up markedly this 12 months.”
So, let’s add streaming music providers to that ‘up markedly’ listing and hope for the perfect?
One oft-cited logic inside trade circles is that streaming music costs are lagging far behind pernicious inflation. And dominant video streamers like Netflix, HBO Max, and YouTube TV are jacking up costs advert nauseam. But when customers are so prepared to soak up music streaming value will increase, why haven’t streaming platforms been extra aggressive with their hikes?
Maybe there’s a motive why Spotify pressed pause on US-based will increase in 2025. And, extra broadly, has lagged behind its video streaming friends.
In the meantime, the subscriber numbers within the US aren’t encouraging.
Based on information shared with DMN Professional final month, the tempo of US-based streaming music subscriptions has been slowing — with our estimates exhibiting a sluggish 1-2% year-over-year progress charge in Q3. Even worse, the slowdown is getting worse by the quarter, suggesting a nasty mixture of subscriber saturation and elevated value sensitivity.
Enter Apple Music, which may very well be enjoying an aggressive pricing sport.
The Monetary Instances says Apple can also be below stress to hike its costs. However sources are suggesting a attainable price-wedge play forward.
Presently, Apple Music’s mainline month-to-month subscription tier is a greenback cheaper than Spotify’s ($10.99 vs. $11.99). Even Amazon Music has a greenback low cost for Prime subscribers, suggesting a severe aggressive value play forward. Each mega-companies have broad subscription, procuring, and {hardware} packages to feed — in that context, is it value upsetting these worthwhile ecosystems for an additional buck, or is it higher to make use of a less expensive value to draw and retain extra converts?
It’s additionally value noting that the final time Apple Music elevated its costs in america was in October of 2022 — greater than three years in the past. If Spotify pulls the set off on one other value enhance, will Apple neatly proceed to remain put — and use its upcoming Tremendous Bowl sponsorship to woo price-sensitive subscribers with a $2 low cost?
For Spotify, mountain climbing costs once more is like going for it on 4th down. Perhaps there’s a payoff, however it’s dangerous.
