As streaming services solidify their position as the dominant way that people listen to music, a common question swirling around — from investors and users both — has been whether subscription prices will go up. Over the past decade, Spotify has helped set a U.S. market standard of $9.99 per month for a premium music subscription; it hasn’t adjusted that figure once, even though its video-streaming counterpart Netflix has hiked its rates three times in the same time period. Discounts and multiple-user packages often take Spotity users’ payments even lower.
But the company remains adamant that its low price point is key to its success. Paul Vogel, Spotify’s head of financial planning and analysis, treasury, and investor relations, doubled down on the stance on Tuesday when he spoke at Goldman Sachs’ annual Communacopia Conference. In response to questions about whether Spotify would expand the pricing tests that it’s doing in Scandinavian countries — where it raised family-plan subscription fees by around 13% earlier this year — Vogel said that the Spotify is “not yet at a point where you have stickiness globally.”
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The Swedish streaming service is more interested in “growing users and subscribers and bringing more and more value into the ecosystem, which is essentially lowering pricing,” Vogel said, adding that while the Scandinavian tests have yielded positive results, they are not to be taken as a signal of Spotify’s global plans because they reflect conditions in one particular market. “That’s not to say we wouldn’t test other markets, but our main focus is on growing the top of the funnel: users and subscribers,” he said.
Spotify is also well aware of users taking advantage of the ultra-cheapness of its family plan, which allows six users to share a $14.99-a-month subscription (“It’s shocking how many six-member families there are out there,” Vogel remarked at Tuesday’s conference) — but doesn’t believe that those loophole discounts will cause any long-term problems. “We know it gets people into using the product, and eventually they’re going to graduate away from the family plan,” Vogel said, echoing the sentiment of Spotify executives’ past remarks about the conversion rates of free users to premium users.
Since going public on the New York Stock Exchange in April 2018, Spotify has faced increasing pressure to turn a profit — or at least to supply a roadmap to a point in time when it might finally be profitable. Artists and record-industry executives are also pushing for more aggressive pricing, especially amid a new round of licensing negotiations. But CEO Daniel Ek defended the service’s low subscription fee in a Freakonomics podcast in April, noting that music-streaming subscriptions have to compete with radio’s accessibility and YouTube’s “entire archive of music that you can listen to entirely for free.”
Vogel’s question-and-answer session on Tuesday also hit upon Spotify’s commitment to growing its podcasting business, its desire to “own music discovery,” and its gradual progress toward enabling more artists to make a living off of its platform. Speaking about Amazon’s foray into high-resolution music streaming this week, Vogel said that “we haven’t talked much” about adding hi-fi options because “if you go back and look at it, it’s not really something that’s been a big differentiator among the different services — we think that in terms of what consumers are looking for, it’s not something that’s really resonated.” But, he added, “I wouldn’t say never.”
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