On Monday (April 26), Spotify announced small price increases for various subscription products in 12 additional markets, including the US (family plan) and the UK (student, family and duo plans).
In Brazil, prices for the entire Spotify portfolio – including individual subs – will be increased.
The new prices will go into effect for new users from the end of this month and will affect existing subscribers from June.
Today (April 28th) new information reveals why it was finally time for Spotify to take this step.
New figures released by Spotify as part of its results for the first quarter of 2021 show the full extent of the price erosion that Spotify’s premium Average Revenue Per User (ARPU) has hit in recent years.
According to the new results from Spotify, the monthly premium subscriber ARPU was just under in the first quarter € 4.127% year-on-year, but currency-adjusted 1% year-on-year.
In the previous quarter of Spotify (4th quarter 2020), the company’s ARPU was at € 4.26this was the case in the same quarter of the previous year (1st quarter 2020) € 4.42.
“At current exchange rates, the ARPU number drops below $ 5.00 at $ 4.97.”
Q1 2021 € 4.12 The number per month was equivalent to the USD $ 5.01 per month based on the average exchange rates over the quarterly period.
However, at current exchange rates, the ARPU number drops below $ 4.00 at $ 4.97 for the first quarter.
It’s a sobering statistic: if you hit this, the average Spotify subscriber worldwide will be paying less than $ 5 a month as of April 2021.
Spotify told its shareholders today, “Without FX, the product mix made up most of the ARPU decline.”
“Product Mix” essentially means discounted bundle offerings, including SPOT’s Student, Family and Duo plans, which will now be priced slightly in the few major markets mentioned above.
SPOT says in its letter to shareholders that it has already raised prices on a variety of its premium offerings in over 30 markets, adding that “early results have shown no significant impact on gross revenue or cancellation rates.”
Debates over whether Spotify should raise its prices even further continue to rage in the music industry.
MBW research suggests that the global ARPU for premium music streaming services fell by around 8% over the past year. We estimate it is down 8.4% in the US to $ 7.74 per month.
Noteworthy: Spotify’s ARPU changes (as shown above) don’t take inflation into account.
For example, in the US, $ 5 spent on Spotify in its launch year 2011 is worth just $ 4.25 today (2021) according to reverse inflation.
“Price increases are a good balance – we don’t want to lead people back to piracy or unmonetized solutions.”
Spotify via the Loud & Clear website
On the Loud & Clear website recently launched by Spotify, the company answers directly the question: Why doesn’t Spotify just charge listeners more?
It says: “Spotify convinced listeners to pay a fixed monthly price for music and distracted fans from piracy. The cost of a subscription is not an insignificant amount for many. Price increases are a good balance – we don’t want to lead people back to piracy or unmonetized solutions.
“Even so, Spotify always rates prices in each of our markets, and we have raised prices in some of them. Since Spotify and artist rights holders share the same money pool, our incentives are completely coordinated: We both want to generate as much revenue as possible with listeners and advertisers.
“We have made a number of price increases in various markets around the world over the years, and we will continue to do so when a variety of local and regional factors make it reasonable.”
Spotify today (April 28) announced that it had exceeded 158 million paying subscribers worldwide as of the end of the first quarter.Music business worldwide