Spotify’s ‘Got You by the Balls’ — And Now They’re Testing Out a Price Increase

Spotify early investor Sean Parker

His words, not ours.

Spotify’s got 71 million reasons to test a price increase out.  But will this little experiment work?

Spotify early investor (and longtime board member) Sean Parker may have said it best back in 2010.  “You have no choice,” Parker said, while describing a method for roping users into paid subscribers.  For Parker the strategy was simple: once you’ve created enough playlists and dedicated enough time to the Spotify platform, “we’ve got you by the balls.”

At the time, Parker was referring to the process of luring users away from MP3 downloads and into the ease of on-demand, ubiquitous streaming.  Once that transition was far enough along, with endless playlists and preferences set, it was only a matter of time before scrotum-clutched music fans subscribed.

Genius stuff.  But can Spotify now squeeze the collective gonadal region of its user base a little bit harder?  For the answer to that question, we take you to Norway.

According to details tipped to Digital Music News, Spotify is now lightly testing price increases in Norway.  This could be a country- or regional-specific experiment, and it current involves modest increases of 10%.  Importantly, it will only impact newer Norwegian customers, not existing ones.

That means most people won’t even notice — at least for this stage of the test.  But the ones that do will be important guinea pigs in Spotify’s pricing laboratory.

“In order to meet market demands and conditions, while continuing to offer a great personalized service, Spotify will be increasing the price of our premium subscription in Norway,” a company spokesperson confirmed.

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Of course, Norway is among the most streaming-friendly markets in the world — if not the most streaming-friendly market, period.  Alongside Sweden, Norway has led the way towards subscription streaming (despite also leading the way into pirated downloading way back when).

Layer in the very high living standards enjoyed by the typical Norwegian, and you have a test that could produce some interesting results.  Compared to most other markets, the average Norwegian is probably price insensitive.  That makes a 10% jump palatable, though let’s see.

Spotify may simply be testing out a higher end market, without broader designs on  locales like Germany, the UK, or US.  Importantly, existing users who are totally tethered to the service could be next.  But let’s see how much chutzpah this company has when it comes to pricing.

Of course, the upside here is bigger than 5-10%.  After all, a little price bump can go a long, long way towards improving margins.  Which in turn can translate into billions in added value.

 


Written while listening to Joey Bada$$ and Playboi Carti on Shinola headphones (review coming soon).  Send confidential tips to [email protected]!

5 Responses

  1. interesting

    I’ve posted this several times on here in the past… Price increase can quickly change everything, from their profit to the rights holders profits.
    Lots of countries are already substantially more expensive than in the EU union (most EU = 10€ , UK = 10GBP=12€ … DK = 13.3€ ) just little bumps already in place that squeeze a lot more mana for spotify.
    I was for raising the sub since ever and it should be AT LEAST 13€ in developed countries.
    Having said that, an EU sub will get spotify 10€ while an US sub only 8.2€ – but is US poor? Nope, richer that anyone.
    How are you exactly going to make anything with just 8.2€ in such a huge market like the US , which also has a very high standard.
    Just some test maths = 70m people with a sub of 15€ would bring 1.050.000.000€
    70m people with 10€ would bring 700.000.000 , that’s 350m less.
    Imagine 5m leaving because of the price hike (or going freemium). That’s only 50m worth of mass leaving.
    You still have 300.000.000€ extra funds, regardless of the 5m people lost.

    However I feel they will never be able to afford like Apple can afford (payouts etc.) – they simply have a huge overhead, costs, whatever the hell they’re doing, so a stream from Italy from apple pays double what spotify premium pays in the same country.
    Let me do with their money whatever they want, but seems like their spending are not really the smartest moves. However that NYC lease has much more sense because of the IPO, surely they could spend less though.

    Personally Spotify is the best for listening music, I want my fav artists to get paid when I listen them, even if it has the best interface and experience, I feel like I should rather use Apple or something else, half of the motivation for using such a service is because your fav artists get paid.

  2. Anonymous

    A price increase would mean more royalties to artists and songwriters. Pretty sure that would be a good thing, if they can do so without losing subscribers. I’d certainly pay it. If it’s true that Youtube is going to start spamming it’s free users with ads, I bet other people would pay it too.

  3. DavidB

    10% of what? The theoretical premium price – 10 euros a month, or whatever the equivalent is in Norway – or the average price that premium users actually pay? Since the policy is said to be aimed at ‘newer users’, who are likely on low introductory rates, this may be a very small hill of beans. And then bear in mind that the ‘standard’ rate hasn’t increased in money terms for years, if ever. With inflation in Norway averaging more than 2% a year since 2013, 10% probably isn’t even getting back to the starting point in real terms. So this looks more like typical Spotify spin than anything of substance.

  4. Weird

    Price increase will affect existing customer from june onwards.