Spotify to raise price of streaming music service in 2023

(Image courtesy Spotify, Graphic by The Desk)

Streaming audio service Spotify will raise its subscription prices at some point next year, the company’s chief executive confirmed on Tuesday.

In an interview with the Wall Street Journal newspaper, Spotify CEO Daniel Ek said prices have increased in a number of international territories over the last year or so, with customers largely shrugging off the fee hikes.

Ek gave no indication as to how much a Spotify subscription will cost once the fee increases are implemented. Currently, the price of a basic Spotify subscription costs $10 a month and includes access to tens of millions of songs and podcasts.

Spotify primarily competes in the streaming audio space with Apple and Amazon in the United States. On Monday, Apple announced an immediate price hike for its Apple Music service, with customers paying an extra $1 to $2 to access its catalog of songs. As of Monday, Apple Music costs $11 a month for an individual account or $17 a month for Apple Music’s family plan. Earlier this year, Amazon raised the price of its Amazon Music service from $8 a month to $9 a month for Amazon Prime members.

Of the three streaming audio services, Spotify has been around the longest, and it has cultivated the biggest pool of monthly active users (MAUs). According to its recent quarterly earnings report, Spotify has more than 456 million MAUs) around the world, with around 195 customers agreeing to pay for Spotify’s premium tier.

While Spotify operates an ad-supported version of its music and podcast service, premium subscriptions still account for the bulk of its revenue. Total revenue last quarter was €3.04 billion (about $3.03 billion), of which €2.65 billion (about $2.55 billion) was generated from subscriptions.

Over the last three months, Spotify introduced a new feature that allows subscribers in some countries to purchase audiobooks from a catalog of 300,000 titles, a move that is intended to better compete with Amazon’s Audible and Apple’s Books services. On Tuesday, Ek complained that Apple is forcing Spotify to sell audiobooks through an in-app payment feature, for which Apple takes a 30 percent cut of sales, something he said is hampering Spotify’s growth in the space.

“It highlights the absurdity of the current App Store regime we’re seeing at the moment,” Ek said.

An Apple spokesperson didn’t deny that Spotify was required to use in-app purchases for audiobooks, affirming to the Journal that the app was allowed to sell audiobooks to users after it came into compliance with an Apple policy governing purchases made outside of apps distributed in its App Store.

Spotify has been laser focused on growing its users over the last few years, something that has come at the cost of profitability. On Tuesday, executives said that will likely change, starting next year.

“While it is too early to provide any guidance with respect to 2023, we do expect our profitability rates to improve relative to 2022 as we grow revenue, lap certain investments and deploy capital efficiently,” Paul Vogel, the company’s financial chief executive, said during a conference call with investors.