Spotify According to co-founder and CEO Daniel Ek’s comments in the company’s third-quarter earnings report released on Thursday, the company plans to raise prices further. The streaming media service added 6 million subscribers in the third quarter and achieved 144 million paying users out of 340 million active users. However, sales and revenue were insufficient, which caused the stock price to fall.
By increasing the price of the service, Spotify can obtain higher revenue in the market, and the company believes that users will continue to see the value of paying for streaming subscriptions.
The company did not specify its price increase plan (in U.S. dollars, cents or regions). However, Ek explained how the company considered possible price increases from a broader perspective.
He said that although Spotify̵
What he calls “enhanced content” is Spotify’s investment in developing its content library (especially podcasts). Today, the service has 1.9 million podcasts. This quarter, it released 58 original podcasts and exclusive podcasts, and introduced the product to 16 markets.
One of the highlights is the “Michelle Obama (Michelle Obama) Podcast,” which released the new show from July to August and ranked first on the platform. Spotify’s partnership with DC Comics will begin with the “Batman Unburied” podcast. It also established an e-sports partnership with Riot Games’ “League of Legends” and worked with Chernin Entertainment to transform podcasts into movies and TV shows.
However, Spotify’s “Joe Rogan Experience” deal is more controversial. Now, introducing it internally may cause a moderate headache for the company and may cause some users to unsubscribe as a political position.
This month, Spotify also launched a new tool for Anchor users, allowing them to include licensed music in their podcasts to help create a new type of music and spoken word programming.
All in all, Spotify believes that these efforts are the reason why its services may be more expensive in certain markets.
Spotify said that in its mature market, engagement and hourly value have been increasing over the years.
“I believe that the increase in hourly value is the most reliable signal for us to determine when we can develop our business on the basis of price,” Ek pointed out.
He also said that early tests of price increases performed well.
“Although it is still in the early stages, preliminary results show that in markets where we have tested price increases, our users believe that Spotify is still an extraordinary value, and they are willing to pay more for our services,” Ek said in a speech Said in. He added: “So you will see us further increase prices, especially where we are in a competitive position and where our hourly value is high.”
Spotify has always publicly hinted at price increases throughout the year.
In the first quarter, Ek slightly opened the door to this idea, saying that it is “encouraging” to see the company have the opportunity to raise prices when the economy improves. In the second quarter, Ek again hinted that prices will rise, adding that Spotify’s exclusive podcast content can achieve “pricing power” and provide overall improved services and higher ARPU (average revenue per user).
Today, Ek’s statement shows that higher prices are not just trade-offs or discussions, but are coming.
To date, Spotify has tested price increases in upper-tier services in several markets.
For example, last year, Spotify tested the price increase of its family plan in some Scandinavian markets, which increased the cost by about 13%. The purpose of these tests is to find out whether it is necessary to introduce higher prices globally.
Just this month, there were reports that Spotify had increased the price of its Australian family plan from 17.99 Australian dollars to 18.99 Australian dollars, or about 13.69 US dollars. This change will take effect on October 1st for new subscribers.
Today, Spotify notices that this month it has also increased the price of family plans in six other markets, including Belgium, Switzerland, Bolivia, Peru, Ecuador and Colombia, and Colombia’s Duo plan (two-person plan).
However, Spotify’s higher pricing plan has a caveat: a pandemic. Ek stated that the company will “continue to proceed cautiously in these COVID times to ensure that we are not ahead of the market.”
In other words, there is no point in raising prices during the recession. During the recession, people lose their jobs and cut unnecessary expenses, such as streaming subscriptions.