Spotify Is Hiking Prices (Again)

Everyone is being bitten by inflation in today’s economy, so it’s no big surprise to find that streaming services are feeling the crunch as well. Even Apple has been forced to announce rare price increases for many of its services.

However, two of the more popular streaming services have been bumping up their prices more aggressively — and frequently — than most. For example, Netflix raised its prices by $1-2 across the board in January 2022 before hiking some of them again last fall when Netflix Premium went up to $22.99/month and broke the $20 barrier for the first time.

Now, Spotify is following along. According to Bloomberg, the music streaming giant is planning to announce another rapid-fire price increase — the second in less than a year, depending on where you live.

To be fair, Spotify did a pretty good job of holding the line for as long as it could. The service launched in the US in 2011 for $9.99/month, and that’s where it stayed until last July when it finally conceded defeat and raised its prices to $10.99/month.

Since Apple raised the price of Apple Music to $10.99 in October 2022, Spotify was actually the slightly more affordable streaming option for about nine months. Before that, Apple had also maintained the same $9.99 monthly pricing since Apple Music launched in 2015.

While Apple increased the prices of several of its other services last fall, Apple Music remains at the $10.99 price point (and can be had for less with an Apple One bundle). However, Spotify may soon be leapfrogging ahead with a $1-2 monthly increase in several markets.

Sources told Bloomberg that the music streamer plans to start with five markets by the end of April, including the UK, Australia, and Pakistan. Similar price increases will hit the US eventually, but not until “later this year.”

Bloomberg reporters Lucas Shaw and Ashley Carman describe the move as “a crucial step toward reaching long-term profitability” (we assume Spotify isn’t getting a cut of the $2 billion fine the EU recently levied on Apple for stifling competition), but it also may be trying to fund something that many of its customers aren’t asking for. The price increases are said to be partly to help offset the higher cost of providing audiobooks to listeners.

The higher prices will help cover the cost of audiobooks, a popular service introduced late last year. Spotify offers customers up to 15 hours of audiobook listening a month as part of their paid plan. While the company pays publishers for books, it has so far only collected additional revenue from listeners who exceed the limit.Bloomberg

However, there appears to be some good news for those who aren’t avid audiobook listeners — or simply prefer to get their audiobooks from elsewhere. Bloomberg also notes that Spotify will introduce a new “basic” tier that offers music and podcasts only at the same $11 monthly price it currently charges for premium.

It’s unclear if Spotify will change the listening limits for audiobooks when the price for Premium goes up, but the Basic plan will reportedly have no access to audiobooks without paying extra, presumably on a per-book basis.

‘Spotify Hi-Fi’ Is Still Coming

Meanwhile, Spotify is also said to be still working on its “supremum” plan to offer high-fidelity audio — an important area where the streaming provider has fallen behind its competition.

Spotify announced plans for a lossless “Hi-Fi” tier over three years ago but got eerily silent after Apple took the wind out of its sails by offering hi-res lossless audio on Apple Music at no extra charge. Amazon followed suit the very same day by dropping its pricier Amazon Music HD plan and making high-quality audio available to all subscribers.

By the end of 2021, the entire Apple Music catalog was Lossless quality, and Spotify wasn’t saying much about its plans. It remained quiet until early 2023 when Spotify co-president Gustav Söderström told The Verge that “some kind of lossless experience” was in the works.

A few months later, Bloomberg’s Carman first revealed Spotify’s more specific plans for a “Supremium” tier that would offer “high-fidelity audio” and a few other perks for a higher monthly subscription price. At the time, Carman said the new plan was expected to launch in non-US markets sometime in 2023, but that never happened.

Meanwhile, even Tidal, which launched in 2014 with two tiers of audio quality plans as one of its most distinguishing features, has seen the light and dropped its more expensive plan. It now offers high-res audio and Dolby Atmos to all for the standard $10.99 price, just like Apple and Amazon.

That will make it even harder for Spotify to compete with its own premium high-res plan, and the company may be stuck between the rock of music industry licensing costs and the hard place of trying to market a more expensive “Supremium” plan with a straight face.

As Bloomberg notes, Spotify has struggled to remain profitable, losing money every year since it went public in 2018. That’s mostly due to paying out 70% of its revenue in royalties to the music industry — over $9 billion last year out of $13.2 billion in total revenue.

While Apple, Amazon, Tidal, and Google also pay royalties, they may have found ways to use their bargaining power to negotiate lower fees. Except for Tidal, the other tech giants also have large pools of money to draw from, and Apple and Tidal only offer paid plans rather than relying on advertising to supplement revenue from a large base of free subscribers.