Spotify Announces Price Hike in the US and 52 Other Countries: What Does This Mean for the Music Industry?

The latest buzz? Spotify, after a 12-year wait, has declared a 10% increase in its primary individual Premium subscription cost in the US, moving from USD $9.99 to $10.99 monthly.

But there’s more: Spotify is also adjusting the pricing of its other US subscription packages. This encompasses the Family Plan, which will now cost $16.99 monthly, marking the second time Spotify has raised this rate in the US. This adjustment aligns Spotify’s Family Plan with competitors like Apple Music and YouTube Music.

The even bigger news? Spotify’s price surge isn’t limited to the US. The company is also revising its subscription fees in 52 other countries, including major markets like the UK, Canada, Brazil, and Australia.

Given these changes, a pressing question arises: How will this impact Spotify’s revenue, especially considering they distribute about 70% of their income to music rightsholders?

Understanding Spotify’s US Reach: Data from the National Music Publishers’ Association (NMPA) reveals that Spotify boasted 44.4 million paid US subscribers in February 2023. Furthermore, Spotify’s Q1 2023 report indicates that of its 210 million global Premium subscribers, roughly 28% are in North America. This translates to about 58.8 million subscribers across the US and Canada.

If each of these US subscribers experienced a $1 monthly price hike, Spotify’s annual revenue could see a boost of over $533 million. However, the real scenario might be more intricate due to various subscription plans and promotional offers.

Breaking Down the Numbers: Spotify’s global monthly ARPU (Average Revenue per Paying User) at the end of Q1 2023 stood at EUR €4.32, equivalent to USD $4.64. If we apply a 10% price rise to this ARPU, each US subscriber could potentially contribute an additional $5.57 annually. This could mean an annual revenue increase ranging between $247 million and $533 million for Spotify, just from the US market.

Global Implications: Beyond the US, Spotify’s price adjustments in 52 other countries present even more significant revenue growth opportunities. For instance, considering North America alone (US and Canada), the potential additional revenue could be around USD $328 million annually.

Comparing with Apple Music: Apple Music, another major player, had 32.6 million paid US subscribers in February 2023. If we apply similar calculations, Apple could see an annual revenue increase between $181.5 million and $391 million.

In conclusion, with streaming platforms like Spotify and Apple Music adjusting their pricing, the broader music industry stands to benefit substantially. The hope is that these price hikes will be accompanied by a steady increase in subscribers globally.

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