Spotify’s standard €/£/$9.99-a-month price for a one-person subscription has remained the same ever since its launch in 2008, but could the company be preparing to increase it? It’s exploring the idea.
The streaming service is testing a 10% price increase in Norway, starting in May for new customers, before rolling it out to existing subscribers in July, according to Bloomberg. That will apply to Spotify’s standard, student and family-plan subscriptions.
“In order to meet market demands and conditions, while continuing to offer a great personalised service, Spotify will be increasing the price of our premium subscription in Norway,” confirmed a spokesperson. For now this is a one-country experiment, but it will play a crucial role in any wider global rollout of the price increases in the months ahead.
There has been regular speculation about Spotify following in Netflix’s footsteps by raising its subscription prices, to match inflation if nothing else. Yet at Spotify’s recent investor day before it went public, its CFO Barry McCarthy – formerly of Netflix – pushed back on the idea.
“Early in the life of a new market, and particularly because of the scale advantages… the smart strategy for us, and I think Daniel [Ek] and I are aligned here, is to play the market-share game,” he said.
On the one hand, there are clear merits to a price rise. Spotify generated €3.67bn (around $4.44bn) of revenue from premium subscriptions in 2017, according to its recent prospectus. A 10% increase globally would have boosted that by €367m – nearly as much as the company’s annual operating loss of €378m in 2017 (although this is an overly-simplistic comparison to use).
The great unknown, though, is whether a Spotify price-rise would lead rivals to follow suit, particularly those owned by big technology companies with the financial resources to stick at $9.99 a month, and potentially capitalise on the price disparity with a $10.99-a-month Spotify.
That said, Netflix’s slate of original TV shows and films gave it the confidence to raise prices without fretting about rivals. Spotify would be making its case based more on features – its curated and personalised playlists, for example – than on content.
That certainly shines a new light on a quote from its chief R&D officer Gustav Söderström at Spotify’s press launch earlier this week. “We are not just in the business of giving access to music – we are in the business of music discovery. We think the others are still in the business of giving access,” he said.
This may well be the argument Spotify ends up making to consumers, if its Norway experiment expands to the rest of the world.