Spotify seems to be experimenting with a price hike for its premium music subscription service. Spotify users in Norway will experience a 10% increase for all Spotify plans starting in May for new customers, while existing customers will see the increase in June.
After going public earlier this month, Spotify is anxious to convince its investors that its business is profitable. It is well known that Spotify is a loss-making company that has yet to turn a profit. However, with a total of 71 million paying users worldwide, a slight price increase looks to be the best way to pave for profitability.
However, the increase in the number of paid subscribers comes at a price for Spotify. Over the years, it has introduced heavily discounted price to entice free users to be paying customers. Therefore, the revenue that it gains per customer has shrunk by 26%.
There are several reasons why Spotify chose Norway to test for the price hike. Norway enjoys a high living standard that makes it a price sensitive country. Furthermore, Norway has one of the highest numbers of paying subscribers for Spotify.
Though the test is limited to one country so far, there can be a possibility for a price increase in other countries also. Other companies have increased its subscription price. Netflix, for example, has increased its price by 12% over the years but its paying customers kept growing. Spotify might be hoping for the same outcome. However, the difference is that Spotify and its competitors offer the same service and it can be easy for the customers to jump to other services such as Apple Music.
(Source: Bloomberg)
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