Spotify Announces Price Hike and Strategic Shift Towards Audiobooks

Key Points

• Spotify to increase subscription prices by $1 to $2 in key markets, Introduces new basic tier excluding audiobooks, and explores 'supremium' plan, Strategic pivot towards audiobooks to diversify revenue and reduce royalty costs.

In this news

Spotify, the Swedish music streaming giant, is set to increase its subscription prices by $1 to $2 a month in key markets including the UK, Australia, and Pakistan by the end of April, with plans to implement a similar hike in the United States, its largest market, later this year. This move is part of a broader strategy to diversify its offerings and reduce its dependency on music royalties, which have historically consumed a significant portion of its revenue. The company is introducing a new basic tier priced at the current $11 monthly rate of an individual premium plan, which will include music and podcasts but exclude audiobooks. Additionally, Spotify is exploring a 'supremium' plan that would offer high-fidelity audio among other features at a higher price point.

The decision to raise prices and restructure its service offerings comes as Spotify seeks to bolster its profitability and invest in the rapidly growing audiobook sector. The company has already made strides in this direction by offering up to 15 hours of audiobook listening per month to its paid users, a cost it has largely absorbed. With over $9 billion paid in royalties to the music industry out of $13.2 billion in revenue last year, Spotify's foray into audiobooks represents a strategic pivot aimed at leveraging a key growth lever and diversifying its revenue streams.

The market has responded positively to Spotify's announcement, with its stock price rising by 5.4% following the news. This price adjustment marks Spotify's first significant price hike since last year, which did not deter user growth, indicating strong customer loyalty and a willingness to pay for quality content. As Spotify continues to navigate the competitive landscape of digital content streaming, its focus on audiobooks and enhanced audio plans underscores the company's commitment to innovation and long-term profitability. The success of this strategy will depend on Spotify's ability to attract and retain users in the face of rising prices and expanding its content offerings beyond music.