Spotify plans to raise pricing plans

Spotify Technology SA plans to raise the price of its popular audio service in several key markets for the second time in a year, a crucial step toward reaching long-term profitability, reports Bloomberg.

The streaming giant will increase prices by about $1 to $2 a month in five markets by the end of April, including the UK, Australia and Pakistan, according to people familiar with the matter. It will raise prices in the US, its largest territory, later this year, said the people, who asked not to be identified discussing confidential plans.

Spotify shares jumped 4.6 per cent to $281.92 at 9:35am in New York.The higher prices will help cover the cost of audiobooks, a popular service introduced late last year. Spotify offers customers up to 15 hours of audiobook listening a month as part of their paid plan. While the company pays publishers for books, it has so far only collected additional revenue from listeners who exceed the limit.

The Swedish audio company is also going to introduce a new basic tier that will offer music and podcasts -- but not audiobooks -- for the current $11 monthly price of an individual premium plan, said the people. Users of that plan will need to pay for audiobooks.

The new basic tier is the first of what will be several new pricing options from Spotify. The company has also been working on a ‘supremium’ plan, which would charge customers a higher price for access to high-fidelity audio, among other features, as Bloomberg reported last year.

For years, Spotify offered most customers two options -- a free, advertising-supported music service with limited functionality and a paid listening product with unlimited access.

But the company has lost money every year since it went public in 2018, largely because it pays out about 70 per cent of its sales in royalties to the music industry. Spotify paid record labels, artists and others more than $9 billion last year – from $13.2 billion in revenue.

Management has attempted to reduce Spotify’s reliance on the music industry by offering other types of entertainment.The company dabbled in video before deciding to focus on offering many different kinds of audio. It began by pouring billions of dollars into podcasts, an emerging field of on-demand audio. While management has said podcasts will turn a profit this year, Spotify also fired thousands of employees and curtailed its investment in original audio programming.