Is Spotify Going to the Crazy Place on Pricing?

Wall Street loves those price increases. And so do the major labels. Subscribers, particularly in the US, may be less enthusiastic.

Spotify has been hiking prices all year, including in critical markets like Western Europe. Over the past few days alone, Spotify has served up an incremental increase in the UK and a seriously eye-popping run-up in Switzerland. 

Now, ahead of Spotify’s heavily watched Q3 earnings call, the question is: when’s a big US-based increase coming?

Or, perhaps the better question: should a big price increase be happening?

That’s the industry’s question of the hour, though, of course, consumers aren’t being consulted here—at least directly. Unfortunately for Spotify, however, subscribers have been voting with their wallets—and slowing their roll in the US this year. 

Whether that’s pegged to specific prices, simple market saturation, or other factors is a tricky question. But according to DMN Pro data, new subscriber add-ons are slowing markedly.

We’ve measured brief periods of slow growth, no growth, or even negative subscriber growth at Spotify in the US, before a more recent recovery to single-digit year-over-year gains.

Indeed, one reasonable conclusion is that Spotify specifically excluded the US from its aggressive worldwide price hikes because of these slowdowns, which may be partly driven by American wallet-tightening across a vast range of goods and services.

Meanwhile, SPOT’s stock has sagged in October, partly due to Daniel Ek’s retreat to the Chairman’s backroom, among other possible culprits.

Will that prompt Spotify to juice the stock price with a price spike?

That would be roundly appreciated by Wall Street, at least over the short term. Goldman abruptly downgraded Spotify, though most analysts remain bullish and BUY-rated on the stock—and goddammit, they want their price increases!

“We remain constructive on Spotify shares as we expect upcoming price increases, new tiers/product features, and a ramp in advertising to support further acceleration in revenue growth while margins continue to expand,“ UBS recently opined, along with a freshly bullish, $850 price target.

Q2’s financial wrap-up was a rough one for Spotify. But ahead of Spotify’s Q3 financial call early next month, most analysts anticipate continued subscriber growth worldwide, though ARPU levels could be an issue.

Subscriber growth rates within North America may also prove troublesome, with continued problems in the ad-supported and ARPU arenas also likely. But flatlining is one thing. Could an actual subscriber decrease take root after one too many price hikes?

Meanwhile, the wolves are waiting – with one wolf in particular circle aggressively. 

Astute observers have noted that Spotify’s arch-nemesis, Apple Music, has been holding the line on pricing increases, particularly in the US but also in Europe and worldwide. In fact, the last Apple Music price increase happened in late October of 2022. 

That’s likely not accidental, with Apple also fine-tuning switch facilitators like their playlist transfer tool. 

Already, DMN Pro data is showing outsized Apple Music gains in Family Plans, where Spotify is vulnerable but still spiking prices. We‘re also seeing sporadic monthly gains across other Apple Music subscriber tiers that aren’t appearing on Spotify’s end.

Apple still has plenty of other tools for driving bigger pricing wedges.

Beyond the top-line music-specific rates, Apple can flex aggressive bundling and extended-trial plays while promoting the hell out of them. That includes a big Bad Bunny-fueled Super Bowl sponsorship, coming to a giant TV screen near you.

Back at Spotify HQ, price jumps are undoubtedly supported by studies full of inflation data and relative increases at platforms like Netflix. It all makes infinite sense, though not necessarily to those actually paying Spotify’s monthly bills.

Stay tuned.