Spotify has announced an increase in the prices of its premium plans in the United States in a strategic move to bolster its profit margins.
Effective from Monday, the Swedish music-streaming giant has raised the monthly fee for its individual plan from $10.99 to $11.99, the duo plan from $14.99 to $16.99, and the family plan from $16.99 to $19.99, Reuters news report said.
This price hike is part of Spotify’s broader efforts to enhance profitability, following a period of reduced marketing expenditures and workforce downsizing. The company had previously invested heavily in promotions to drive user growth but is now shifting focus towards more sustainable financial strategies.
Spotify reduced its sales and marketing expending to $324 million in Q1 2024 from $347 million in Q1 2023. In a notable milestone, Spotify reported a quarterly gross profit exceeding 1 billion euros ($1.08 billion) in April, attributed to its reduced marketing spend.
In a communication set to be sent to its U.S. subscribers over the next month, Spotify stated, “We’re increasing the price of Premium Individual so that we can continue to invest in and innovate on our product offerings and features.”
Spotify, which competes with major players like Apple Music and Amazon Music, offers both an ad-supported free service with limited features and a premium subscription-based service. Premium subscribers constitute the bulk of the company’s revenue.
The number of premium subscribers rose by 14 percent to 239 million, and the company projected its monthly active users to reach 631 million in the second quarter. Spotify’s revenue from its premium subscribers $3,247 million in first-quarter. Spotify’s revenue from ad-supported digital music service was $389 million.
Spotify’s total revenue in first-quarter was $3,636 million. Spotify has generated revenue of $1,394 million from United States, $336 from United Kingdom and $1,904 million from Other countries in Q1 2024.
Analysts suggest that Spotify could further boost growth by introducing tailored subscription plans that cater to specific consumer interests, such as music, audiobooks, and podcasts.
Baburajan Kizhakedath