TechInAfrica – Spotify Technology SA is using Scandinavia as a testing ground for its service pricing and will use the result as a consideration as to whether the company can raise prices on a global scale, according to people familiar with the matter. The service’s family plan will have a raise at about 13% but the test doesn’t directly mean a rise in prices in other countries or either in Scandinavia. This information comes from to the people who didn’t wish to be identified because these prices increases are yet to be announced, while Spotify hasn’t commented on this matter yet.
Spotify’s subscribers had paid a little less than usual, in which the average price the company received has declined over the few years, since most of their services are very generous with discounts and they use it as a means to attract new customers, especially to lure them into subscribing to the family plan. By raising prices, Spotify hopes that it would boost markets’ revenue where the service already has a profound presence. Based in Stockholm, the music service is a big player across Northern Europe, with its family plan costing around $15 per month, allowing up to 5 people to use the plan. Premium Duo is another plan that Spotify has tested, which offers 2 subscriptions only at monthly 12.49 euro or $13.91 cost.
The rise of these prices might help placate music companies who have been in trouble with the falling revenue on each user. Previously, they question Spotify’s decision of not taking advantage of its market-leading position to raise the rates. They see discounts as the new culprit that decline the average paid price by Spotify’s subscribers.
Spotify still loses money, despite the fact that it has 108 million paying subscribers with 232 million active users, which makes it the largest paid music service on a worldwide scale, and despite its goal of not giving up that achievement and passing the crown to another growing service any time soon. The company claimed to have a faster growth compared to its equal competitor, Apple Music, which similarly charge at $15 per month for its family plan, but with lesser subscribers using the service, 60 million on mid-year. With a very similar reason, Spotify uses the growth factor as their reason as to playing safe with its prices. Relying on discount seems like the best route to take in their vision, and to let the future subscribers get accustomed to the streaming on-demand.
So, while it may seem that company is having significant time with its growth, there remains a minority of music listeners from around the world who have adopted the streaming service, and Spotify executives have said that the addressable market is at least about 1 billion people.
The customer base was largely resided in North America, Latin America, and Europe, accounted for more than 80% subscriber base. And it’s also swaying a big push in the Asia current, selling its service on lower prices in order to compete with local music streaming service and not to mention, those free alternatives like YouTube or Vimeo.
Unlike other competitors such as Apple Inc., YouTube, and Amazon.com Inc, Spotify doesn’t have the luxury of offering other products other than its streaming service. Meanwhile, the three big players have more or less of similar services, like the million available songs or albums on-demand, list of playlists and the podcasts, but they can lure these products’ subscribers into making payment on their products, like iPhones, extensive advertisement based on the customer’s preferences, or even toilet paper, which you can pretty much all of them on Amazon.
- 17 billion hours of content listened
- more than 50% podcast audience growth quarter-over-quarter
- more than 400K of artists and teams using Spotify for Artists monthly
- more than 13 billion euro paid to the rights holders since the music service’s launch,
Spotify is thriving with its growth according to its internal reports for the second-quarter earnings this year, released just last month. The company has also collaborated with AT&T for an unlimited streaming session. If you are already an AT&T premium plan’s subscriber, you can pick Spotify with no extra charge, and when you’re already both a Spotify and AT&T premium subscriber, you can keep your current Spotify account, with your playlists intact, and just sign up to AT&T website. Spotify allows trials, and after that, you will be regularly charged with $9.99 per month.
Last month’s Spotify Lite release of their service, available in 36 countries including Africa, is an alternative for a user on a tight mobile data budget, with a size of 10 MB and available for download on Android 4.3 or higher.
Source: bloomberg.com, newsroom.spotify.com