Netflix Just Raised Its Prices In the US — Is Spotify Next?

Spotify

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With Netflix having raised its stateside monthly subscription costs after reporting lower-than-expected Q3 2020 profits, some are speculating that Spotify will be the next subscription-based streaming platform to increase fees for U.S. users.

Spotify also missed investors’ third-quarter expectations, albeit in terms of earnings and while seeing paid subscribers reach 144 million and total monthly active users (MAUs) crack 320 million. Additionally, Netflix has upped its prices multiple times over the years, despite stiff competition from Hulu, HBO, Amazon Video, and others, whereas Spotify Premium’s cost has largely remained flat since the platform’s inception.

Given these points and the fact that just a one-dollar price bump for North American and European Spotify subscribers would generate almost $1.2 billion annually, CEO Daniel Ek broached the subject during the earnings call delivered as part of his company’s third-quarter report. The 37-year-old billionaire stated that high value per hour (in terms of time spent enjoying content) enables Spotify to “selectively increase our price.”

And as user engagement and value per hour have grown “substantially” in recent years, according to Ek, “you’ll see us further expand price increases.” Monthly subscription-cost upticks have gone smoothly (not resulting in a major loss of subscribers) in the nations where Spotify has tested them, continued Daniel Ek, though his company will “continue to tread carefully in these COVID times to ensure that we don’t get ahead of the market.”

In spite of their similarities – popular subscription-based content platforms that are enjoying relatively rapid user and content growth – the chief operational difference between Netflix and Spotify is decidedly significant.

While Netflix has the ability to attract viewers with exclusive, in-house content, Spotify features roughly the same music lineup as competing streaming services like Amazon Music ($9.99 per month/$7.99 for Prime accounts), Apple Music ($9.99 per month), TIDAL ($9.99 per month), Deezer ($9.99 per month), to name just some.

And as the era of exclusive albums is (largely) in the rearview, several of the listed platforms are looking to stand out from the crowd (and presumably boost “value per hour” as well as monthly prices) with exclusive podcasts. 2020 has seen Spotify close deals not just with Joe Rogan, but Kim Kardashian West, WarnerMedia (for scripted shows from the D.C. Comics world), and Addison Rae. Amazon Music arrived on the podcasting scene (with exclusives like Disgraceland and DJ Khaled’s The First One) last month.

Needless to say, a potential Spotify price increase appears to hinge largely on the success of podcasts. The company’s podcasting library grew by 400,000 programs, to 1.9 million, during Q3 2020 – but “interactions with” the shows (not start-to-finish listens) rose by only one percent from Q2, to 22 percent. For multiple reasons, it’ll be worth seeing whether podcasts gain traction on the platform, as many investors are anticipating, or remain of secondary interest to fans.

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