Spotify plans to raise subscription prices for users in the United States in the first quarter of next year, according to the Financial Times, citing sources familiar with the matter.
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The report links pressure from major record labels to both Spotify and Apple Music to increase subscription prices. They argue that prices have lagged behind inflation, while subscriptions remain cheap compared to video services like Netflix.
Wall Street analysts say the price increase is critical for Spotify's stock as the company struggles to show profitability. JPMorgan analysts have predicted that a $1 per month increase would boost Spotify's annual revenue by $500 million.
Spotify recently raised prices in several countries in South Asia, the Middle East, Africa, Europe, Latin America, and the Asia-Pacific region. The company hasn't raised prices in the U.S. since July 2024.
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A Spotify subscription costs $11.99 a month in the US, up from $9.99 when it launched in the country 14 years ago. Spotify currently costs $1 a month more than Apple Music for individual plans.
The price hike in the US is expected to provoke a backlash from consumers, but is seen as necessary to balance the company's finances. Spotify has invested heavily in content, such as podcasts and exclusive partnerships, and increasing subscription revenue is critical to continuing those investments.
Additionally, the company faces increasing competition from other streaming platforms, and raising prices may be a strategic move to differentiate and strengthen its position in the market. Users may see the increase as an opportunity to enhance the quality and variety of content offered.
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The move comes at a time when consumers are more sensitive to price increases due to the overall economic situation, but Spotify seems to believe that the value it offers will justify the increase. The coming months will show whether this strategy will pay off for the company.
