Why Is Spotify Premium Going Up? Streaming Service Becomes Latest to Jack up Monthly Costs
Key takeaways
- Spotify has hiked the price of its premium subscription plans by as much as 20%
- The streaming giant’s financial woes continue with widening losses reported for the second quarter
- Spotify’s stock was down to its lowest ebb in seven months
Spotify Premium subscribers will have to swallow a price hike after the company announced it was pushing up the prices of its premium streaming tiers by as much as 20%. The move comes as Spotify’s losses widened in the second quarter as the business grapples with bad podcast investments and layoffs. Here’s a look at why the stock has tumbled.
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Why is Spotify Premium going up?
At the start of the week, Spotify announced it was putting up the cost of its Premium subscription plans as much as $2 a month, which translates to a 20% increase for some tiers. The streaming giant hasn’t increased its price plans in a decade.
Spotify will also increase its prices across several other key markets, including the U.K., France, Mexico and Australia. All existing customers will receive a one-month grace period before the new price structure comes into play.
In a blog post, Spotify noted several new developments recently introduced to the platform, including the new Spotify AI DJ. “As we continue to grow our platform, we are updating our Premium prices so that we can keep innovating in changing market conditions”, the post said.
Spotify spent $1 billion in 2022 on expanding its podcast market share and making studio acquisitions, but this year has been a stark turnaround, including layoffs and a restructuring of its podcast division.
Was there an impact on the stock?
Spotify’s share price declined 5.5% on Monday at the news. Unfortunately, the stock went from bad to worse after the company released its second-quarter earnings report. Spotify reported a net loss of €302 million, or €1.55 per share.
Analysts had anticipated the losses to narrow to 63 European cents. Spotify’s revenue only narrowly missed expectations, reaching €3.18 billion when €3.21 billion was forecasted.
On the customer front, there was better news. The streaming service reported 551 million monthly active users for the quarter, up 27% year on year, and had its best-ever quarter for new subscribers, adding 10 million to its user base.
Spotify shares were down 14% thanks to the lackluster earnings beat, the worst performance for the stock since mid-December. The share price has soared 75.5% in 2023 after the tech rally drove up shares.
The bottom line
Spotify’s financial woes have deepened, so the company is trying to rectify the matter with a slight price increase for consumers. Investors and analysts will be wondering whether the move is enough or if we could see further cost-cutting tactics like layoffs come to the front of mind for Spotify’s board.
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