Why didn’t Spotify elevate its $9.99 / €9.99 / £9.99-per-month Premium costs in additional main markets earlier than the typical individual confronted an financial twister from spiraling inflation, vitality costs, and rates of interest?
Earlier than we dig into why it might need been a sensible query to ask, let’s blow away a fable: Spotify has truly elevated costs in a number of markets over the previous yr – however solely on sure sorts of subscriber plans.
In April 2021, Spotify inched up the month-to-month worth of three Premium subscription plans – Duo, Household, and Pupil – throughout 11 markets, together with the UK and a number of European territories.
As well as, SPOT made a solitary worth enhance within the US – transferring up its Household plan from USD $14.99 to $15.99 per 30 days (see beneath).
Thus, it made pricing adjustments in 12 markets throughout this era in whole.
However that’s not all.
In April final yr, asserting SPOT’s Q1 2021 outcomes, Daniel Ek confirmed one thing very attention-grabbing: He stated that Spotify had already carried out a wide range of worth will increase in “greater than 30 markets [in the] earlier two quarters” (a press release MBW believes was made in reference to This autumn 2020 and Q1 2021).
These 30-plus market worth rises have been in addition to the spherical of US/UK/EU worth rises, throughout 12 markets, that Spotify executed in April 2021.
The statistical takeaway, there: Spotify elevated at the least one plan worth in greater than 42 markets within the 12 months between finish of Q2 2020, and finish of Q2 2021.
But in case you glanced on the commonplace Spotify particular person Premium tariff at the moment in three key territories – US, the UK, and Germany – you’d get a really totally different impression.
In every of those markets, you’ll see the identical quantity Spotify has been charging since its launch: $9.99 / €9.99 / $9.99 per 30 days (see beneath).
This truth fuels ongoing debates concerning the continuous erosion of ‘actual’ income being generated by Spotify (and consequently paid out to the music biz) when inflation is factored in.
Spotify’s Particular person pricing in (L-R) Germany, the US, and the UK as issues stand at the moment (Might 17)
Right here’s a major instance of Spotify’s inflationary ‘actual time period’ income discount in motion:
Within the UK final yr (2021), Spotify’s GBP £9.99 particular person Premium month-to-month payment was – in keeping with the Financial institution Of England – definitely worth the equal of £7.60 in the identical cash when Spotify launched in Britain, again in 2008.
That decline (£9.99 to £7.60) was brought on by 2.1% common annual inflation throughout this era, says the BoE.
Supply: Financial institution Of England inflation calculator
Present UK inflation, after all, is operating a lot greater than that: In keeping with the Shopper Value Index, UK inflation rose by 7.0% within the 12 months to finish of March 2022.
And within the US, over the identical 12-month interval, the CPI says inflation elevated by 8.5%.
Consequently, Spotify’s $9.99 / €9.99 / £9.99 worth level is quickly turning into value much less in ‘actual’ worth phrases than it ever has earlier than.
The massive query
This all begs an inevitable question: Ought to Spotify have been bolder in its worth rises up to now in numerous essential markets (such because the US, UK, and Germany)?
Specifically, ought to SPOT have upped the $9.99 / €9.99 / £9.99 month-to-month particular person Premium subscription worth level it’s been clinging to since 2008?
The proof suggests sure, it fairly presumably ought to have.
Paul Vogel, Spotify’s CFO, mentioned the impression of Spotify’s worth rises in 30-plus markets (on the time) on SPOT’s Q1 2021 earnings name in April final yr.
Vogel commented: “[We] be ok with what we’ve completed to date by way of worth will increase.
“If you have a look at gross additions and churn, we’ve seen very minimal impression on both a type of metrics.”
In different phrases, Spotify didn’t see a lot in the way in which of present person subscription cancellations – or a slowdown in new subscriber uptake – after elevating its costs in all these territories.
“If you have a look at gross additions and churn, we’ve seen very minimal impression on both a type of metrics.”
Spotify CFO Paul Vogel, talking in April 2021, on the impression of prise rises in 30-plus territories
But getting readability on precisely which costs Spotify has raised in which markets – particularly in relation to particular person Premium subscriptions – isn’t simple.
Maybe by means of concern of alerting its opponents to its technique, Spotify has not precisely been forthcoming – for media or for its buyers – in itemizing out exactly the way it’s altered costs in most of these 42-plus markets.
With that in thoughts, that is hopefully attention-grabbing: In keeping with analysis undertaken by MBW, in Q1 2021, Spotify upped all of its costs – together with its commonplace Premium tariff – in some essential markets.
A kind of markets was Sweden.
MBW has seen (and number-crunched) the outcomes, they usually should be fastidiously chewed over by the worldwide music biz.
The Swedish success story, and the slowing down of it…
First, some context.
The recorded music market in Sweden (the house of Spotify, after all) was one of many world’s first really mature streaming territories.
By 2014, for instance – simply three years after Spotify launched in the US – streaming was already claiming over 79% of the whole music market in Sweden.
Spotify, simply as it’s at the moment, was by far the most important streamer available in the market.
At this level, as customers continued to make the transition from downloads to streaming, Sweden’s recorded music market was romping upwards:
In 2015, the market’s streaming revenues grew 10.6%;
But within the years that adopted 2015, with a crucial mass of Sweden’s inhabitants already subscribing to Spotify et al, this progress began plateauing.
Plateauing, that’s, till 2021 – when Sweden’s recorded music business noticed its first double-digit streaming progress for six years (+12%, see beneath).
Are you able to guess what modified?
The dramatic impression of Spotify’s worth hike
First issues first: MBW has used the, ahem, scientific technique of deploying web archive platform The Wayback Machine to observe Spotify’s costs in Sweden over the previous 12-18 months.
Consequently, we’ve been capable of decide what Spotify was charging for its subscription plans in Sweden in January 2021, and what it was charging for those self same plans in March 2021.
Between these two dates, we’ve realized, Spotify executed a complete, across-the-board worth rise in Sweden.
Under, you’ll be able to see the distinction: by the top of Q1 2021, SPOT’s Duo, Household and Pupil plans have been all raised by between 10 and 20SEK (round USD $1 – $2) every month in Sweden.
Crucially, Spotify additionally raised that month-to-month particular person Premium worth too: up by 10% per 30 days, from 99 SEK (round $9.99) to 109 SEK (round $10.99).
Spotify pricing in Sweden: January 25, 2021Spotify pricing in Sweden: March 8, 2021
The market impression
So what impression did Spotify’s worth rise gamble have on its enterprise in Sweden throughout 2021?
Seemingly, nothing however optimistic.
Do not forget that Spotify CFO, Paul Vogel, addressing buyers in April 2021, stated of Spotify’s current worth will increase: “If you have a look at gross additions and churn, we’ve seen very minimal impression on both a type of metrics.”
Now, we’ve fairly strong proof of how this performed out in Sweden.
In keeping with IFPI Sverige, Sweden’s recorded music business posted 1.780 billion SEK (round $180m) in annual revenues in 2021, up by 169.7 million SEK (round $17m) YoY.
The overwhelming majority of that cash got here from subscription streaming… of which the overwhelming majority got here from Spotify.
Sweden’s subscription streaming revenues in 2021 hit 1.467 billion SEK (round $148 million). This determine was up by 131.7 million SEK (round $13m) YoY.
In flip, that 131.7 million SEK YoY climb in 2021 was greater than triple the scale of the equal YoY subscription streaming income progress seen in 2020 (+42.6m SEK), in keeping with a comparability of IFPI Sverige’s revealed yearly numbers.
“The rise in income from subscription-based streaming providers [in Sweden] can largely be defined by the value enhance on streaming that was made in 2021.”
Ludvig Werner
Ludvig Werner, CEO of IFPI Sverige (Sweden), has little question what fueled Sweden’s extraordinary soar in progress in 2021.
“The rise in income from subscription-based streaming providers [in Sweden] can largely be defined by the value enhance on streaming that was made in 2021,” he says.
“It’s optimistic that the market has accepted this worth enhance, which additionally reveals how necessary and apparent it’s at the moment to have entry to a streaming service for music.”
(Advert-funded income additionally rocketed up in Sweden final yr by double digits – see desk beneath – however there may be an anomaly on this information: advert income from TikTok revenue was included by the IFPI for the primary time.)
IFPI Sverige’s market figures for 2021 (observe: not like IFPI’s International Music Report, this information set doesn’t embrace efficiency rights revenues)
Not only a Swedish phenomenon
One other main music market through which Spotify raised costs in early 2021 was Brazil – which, in keeping with IFPI, was the world’s eleventh greatest territory that yr.
Once more, MBW has turned to the trusty Wayback Machine to work out exactly what went on within the territory.
Right here’s what we all know: On April 24, 2021, a person Spotify Premium plan in Brazil would have price you BRL 16.90 per 30 days (equal to round USD $3.40).
However by June 11 2021, because of a worth rise within the interim, that very same Spotify Premium plan would have set you again BRL 19.90 per 30 days (round USD $4.00).
That’s a near-18% enhance between these dates.
Each different kind of Spotify Premium plan – Duo, Household, Pupil – additionally noticed its worth pushed up throughout this era.
Spotify pricing in Brazil: April 24, 2021Spotify pricing in Brazil, June 11, 2021
What occurred to Brazil’s streaming market within the wake of those worth rises? You’ll be able to already guess.
The market – the place Spotify is market chief with an estimated 60% share of music streaming subscribers – exploded.
In keeping with native recorded music commerce physique, Professional-Música Brasil, the Brazilian market’s annual subscription streaming income shot up by 28% YoY in 2021, to BRL 1.084 billion (round $219m).
General streaming income (included ad-funded and video) was up by 39%.
And speak about a ‘mature’ streaming market: When it comes to gross sales and streaming solely (i.e. not counting efficiency royalties or sync, however counting CD, vinyl, obtain and so on.) streaming codecs generated 99% (!!!) of Brazil’s recorded music revenues in 2021.
As you’ll be able to see beneath, Brazil’s subscription streaming revenues have been up by a major margin extra in 2021 (+BRL 236m) than they have been in 2020 (+ BRL 187m).
It’s additionally value trying momentarily at Norway, the place Spotify as an “experiment” raised pricing again in July 2018, up from 99 NOK per 30 days to 109 NOK (with different rises for Pupil and Household plans too).
These costs have by no means come again down.
In keeping with the IFPI’s newest International Music Report, in 2021 – three years on from that worth rise – Norway’s subscription streaming revenues jumped up by double digits versus the prior yr (+10.7%).
That is certainly a great signal for the longer-term impression of those worth rises, significantly in relation to attracting new subscribers to Spotify’s paid-for tiers because the years tick by.
Daniel Ek’s massive choice
So what now for Spotify’s streaming worth rise technique?
Will Daniel Ek lastly transfer up that long-lasting $9.99 / €9.99 / £9.99 month-to-month paradigm on the planet’s largest streaming markets?
Ought to he have performed it earlier, when the populations of these markets have been arguably far much less worth delicate than they’re as inflation swirls round all of our heads?
How a lot further income did Spotify sacrifice – or, certainly, salvage – by not growing these 9.99 worth factors within the comparatively heady financial days of 2018 or 2019?
“It is best to anticipate that we’ll proceed to leverage [price] will increase as we consider market circumstances.”
Daniel Ek, talking in April 2021
In April final yr, confirming Spotify’s worth rises in 12 new markets – and the actual fact his agency had already raised costs in 30-plus markets – Daniel Ek was in celebratory temper concerning the lack of churn / subscriber slowdown these strikes had resulted in.
“The optimistic information we proceed to see by way of the worth customers see in Spotify underscores the numerous alternative right here,” Ek memorably informed his firm’s buyers. “And you need to anticipate that we’ll proceed to leverage [price] will increase as we consider market circumstances.”
Spotify continues to be evaluating these market circumstances.
But because of a number of macro-economic threats, they give the impression of being a darn sight extra fragile at the moment than they did when these phrases left Ek’s mouth, simply 13 months in the past.Music Enterprise Worldwide
