Spotify's Next Move: Higher Prices and New Features

Spotify is set to raise its prices as it invests in new features and pursues its goal of reaching 1 billion users. According to co-president and chief business officer Alex Norström, price increases are a part of the company's "business toolbox" after years of keeping prices flat. These hikes, alongside recent cost-cutting measures, led to the music streaming giant’s first annual profit in 2024.

The company is already looking at implementing price increases in a few markets in September and plans to accompany future adjustments with new services and features to add value for consumers. Despite the recent price hikes, Norström noted that Spotify is continuing to gain market share, with people converting to the service. The company's subscriber numbers have risen 12% in the past year to 276 million, while monthly active users increased 11% to 696 million, both ahead of expectations.

Spotify is developing new offerings to increase user engagement and "stickiness," including investments in AI tools like an AI DJ and expanding into audiobooks and podcasts. The company is also working on a potential "superfan" subscription tier that could cost an additional $6 a month in US, aimed at the biggest fans of artists but the details of which are yet to be revealed. Norström stated that the company would continue to expand its service across devices including with investments in AI, with a focus on what they are calling "the ubiquity strategy."

What This Means For Us:

Spotify has a significant market share in the European market including Ireland and these price hikes may lead some users to switch to cheaper alternatives, such as Amazon Music or YouTube Music, or to revert to ad-supported free tiers on the other hand the company's expansion into podcasts and a new creator monetisation program, which recently launched in Ireland, could also present opportunities for Irish podcasters and video creators to reach a wider audience and generate revenue. These developments are likely to intensify competition for audience attention and advertising revenue among a range of platforms, including traditional radio broadcasters and other streaming services.

Sources:

Financial Times, RTE