After 14 years, Spotify has finally raised its prices, signaling the end of the £9.99 monthly subscription fee. In over 50 markets, including the US and the UK, the standard monthly subscription price has increased by 10%. This move has been met with some tentative approval from the music industry, although many argue that a £1 increase will not address the wider challenges surrounding streaming economics.
While Spotify claims that the price hike is intended to invest in and enhance the user experience, the company strategically avoids mentioning the potential benefits for recording artists and songwriters. It is important to note that the share of streaming income for artists and songwriters is not solely determined by Spotify but may also depend on the terms of their record deals. In the US, Spotify was among the services that opposed an increase in the royalty rate for songwriters, but their efforts failed, resulting in a new rate of 15.1%.
This price increase follows Spotify’s significant scaling back of its podcasting division in June 2023. The company has been operating at a loss since its launch, reporting an operating loss of €156m (£133m) for the first quarter of this year and an adjusted operating loss of €112m (£96m) for the second quarter. Consequently, Spotify’s stock plummeted by 14% upon the release of its latest financial results.
Although some view the timing of this price increase as an attempt to boost Spotify’s stock price, others, such as Annabella Coldrick, chief executive of the Music Managers Forum, see it as a positive step for songwriters. Coldrick believes that the increase in subscription fees will lead to higher royalties for composers and songwriters. However, she also acknowledges that the failure to raise subscription prices for the past 15 years has undermined the value of music per paid user.
The streaming services face a delicate balance between maintaining an affordable price for consumers and ensuring fair compensation for music creators. As Apple Music and YouTube Music have also raised their prices in recent times, it appears to be a growing trend within the industry. David Martin, CEO of the Featured Artists Coalition, believes that surpassing the psychological barrier of £9.99 may open the door to more frequent price increases.
Nonetheless, concerns remain about how the additional revenue will be distributed. Platforms like Spotify and Apple Music typically take 30% of all subscription income, leaving artists with a smaller share, especially those locked into unfavorable royalty deals. The issue of fair remuneration for artists and transparency in revenue sharing continues to be a significant challenge in the streaming industry.
Overall, while Spotify’s price increase has been met with mixed reactions, it represents a significant shift in the streaming landscape. It remains to be seen how this change will impact the industry as a whole and whether it will lead to meaningful improvements for music creators.
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