Investors were getting restless. The company promised. Today, the moment is at hand. After 12 years of delivering the Spotify Premium service at the $9.99/month price point, Spotify has announced a raise to $10.99.
“As we continue to grow our platform, we are updating our Premium prices so that we can keep innovating in changing market conditions. These updates will help us continue delivering value to fans.” –Spotify
In the Q1 earnings report (RAIN coverage HERE), CEO Daniel Ek promised investors that a price increase was forthcoming, though price and timing were not provided.
The action is global in scope, though not comprehensive. Fifty-three national markets are affected, of about 150 regions in which the service is available.
How this increase will affect Spotify finances is a nuanced question, depending on how many Premium users are affected. To estimate, we refer to RAIN’s chart below, which tracks Spotify monthly active users (MAUs) from the platform’s U.S. launch in 2011 through 2022.
Usage has grown during 2023, but the price effect doesn’t affect all users, so this calculation suffices as an estimate, undoubtedly on the high side. We know that Spotify reported 210-million MAUs at the end of Q1. Based on that number, the result of the price increase would be $2.52B in top-line revenue gain per year. (Spotify annual revenue is approximately $12B.)
This rough estimate does not assume any reactive cancellations, and does not adjust for non-U.S. currencies.
Spotify’s Q2 earning call is scheduled for tomorrow, July 25. We will doubtless see our estimate dramatically adjusted based on actual number of users affected around the world. As of this post, Spotify stock (SPOT) plunged downward Monday morning by five percent.