Have you listened to all the recent investor presentations from the world’s largest music companies? Of course you didn’t. You watched Netflix with your evening, like a normal person.
But here at MBW, we can’t get enough of music biz CEOs sharing current tidbits.
And we’ve certainly noticed that one of the most recurring topical tidbits of late when analysts question music leaders is whether Spotify (and other streaming services) should raise their prices through the rest of 2022.
At this point, it’s worth reminding you that Spotify actually has that already increased prices – when it comes to multi-user bundles like the Family Plan – in multiple markets, including the UK and US, in the last 12 months.
PLACE also increased its rate for individual premiums in markets such as Brazil, Argentina and Sweden last year, as MBW pointed out in our analysis last week.
Yet that classic price of $9.99/€9.99/£9.99 per month – for individual premium Spotify subscriptions in the service’s largest markets – still remains the same in the US, UK and the largest. markets of Europe, such as Germany.
Last week, Sony Music Group chairman Rob Stringer was questioned at a Sony investor event about whether it was time for music streaming prices to go higher.
Stringer said, “It’s up to the DSPs, not us. But do we think? [the streaming business] can withstand price increases in the developed markets? We do.”
“we think” [the streaming business] can withstand price increases in the developed markets? We do.”
Rob Stringer, Sony Music Group
Last month, Eric Levin, CFO of Warner Music Group, noted that Spotify had already increased prices in certain markets in the past 12 months, linking that trend to SPOT’s premium ARPU down 3% in the first quarter. you grew.
Speaking with Warner’s investors about the company’s earnings call for the first quarter (fiscal Q2) 2022, Levin added, “We continue to encourage [other music streaming services] to see pricing as an opportunity to improve streaming economic performance.”
And then there’s Pershing Square Holdings, led by billionaire Bill Ackman.
Pershing Square, a 10% shareholder in Universal Music Group (in addition to its subsidiaries) — and therefore a major player in the global music business in its own right — is optimistic that the largest music streaming companies will expect further price increases in the coming months.
Ryan Israel, a Pershing Square partner, told Pershing’s investors last month, “One of the unique things about music streaming is that we believe it’s the cheapest, high-quality entertainment you can find.
“As a result, the hourly costs for [music] streaming is very cheap; the total monthly subscription you pay to Spotify, Apple Music or Amazon [Music] is very low compared to… a lot of other forms of entertainment in general.”
“Given that inflation in the broader economy is running in the high single-digit rates, these [music streaming] companies do not have [raised] pricing. And we think it’s very likely in the future that they decide to [raise] some prizes.”
Ryan Israel, Pershing Square Holdings
Israel added: “Given that inflation in the broader economy is running in the high single digit rates, these are [music streaming] companies do not have [raised] pricing. And we think it’s very likely in the future that they decide to [raise] what prices.
And because Universal is basically a royalty on total streaming revenue, any prices the music [streaming] providers would [increase] would flow directly as revenue from Universal, as well as to the artists.”
Denis Ladegaillerie, CEO of Paris-listed Believe, was also polled by analysts about streaming prices on Believe’s Q1 earnings call last month – but he had complete faith in Spotify to make the right decisions, at the right time.
Ladegaillerie said: “All of our deals with DSPs are based on revenue sharing and we believe it is in the interest of the DSPs to maximize the value of their user base.
†[The streaming services] are much smarter than us to know whether to increase subscription prices by one euro, two euros, three dollars or four dollars.”
Denis Ladegaillerie, Believe
†[The streaming services] are much smarter than us to know if we should increase the subscription price[s] with one euro, two euros, three dollars or four dollars.
“They have the data, and they… [know] whether that is going to create churn, create value or not.”
After all this uproar, it was no shock to see Spotify co-founder and CEO Daniel Ek questioned directly yesterday (June 9) on the topic of price hikes at the company’s Investor Day in New York.
In addition to Spotify EVP/CFO, Paul Vogel, Ek was asked by an analyst – Mark Zgutowicz of Benchmark – why pricing was not discussed in the preceding three hours of Spotify’s presentation.
Zgutowicz said Spotify had been adding new types of content to its premium service in recent years — especially with podcasts and now audiobooks on the way — but said: “We’re still at $10. [per month] subscription price”.
Zgutowicz further noted that consumers had seen monthly price increases “beyond music” — an obvious nod to Netflix, in the video world, which has increased the US standard price several times over the past few years.
However, the analyst also acknowledged that current macroeconomic trends (inflation, rising interest rates, energy prices) could make any announcement of price increases a vulnerable process for Spotify.
“Why not pull that lever,” Zgutowicz asked, “especially in your developed markets, where no one will leave Spotify for another service [because of] an increase of one or two dollars?”
Daniel Ek said in response: “We agree. Right now we think Spotify is great value for money, and that’s what gives us the opportunity to increase the ARPU over time [via price rises] at.
“We definitely think there is price power with this model [and] the more stuff we bring to the platform, the more value we add to users, which of course should mean we have more opportunities to increase prices over time. It is absolutely part of our strategy.
“That said, we’re in a macro environment that’s very uncertain right now.”
“The more stuff we bring to the platform, the more value we add to users, which of course should mean we have more opportunities to increase prices over time. It is absolutely part of our strategy. That said, we are in a macro environment that is very uncertain at the moment.”
Daniel Ek, spoke yesterday
In a clear reference to Netflix’s disappointing Q1 performance — and projected to lose 2 million more net subscribers in Q2 — Ek added: “I personally look at what’s happened in the video streaming business and I wonder if that industry hasn’t done that. walk ahead.
“Because frankly it has raised prices, but it’s also now in a position where it’s getting harder and harder to find future growth.”
Spotify’s Vogel added to yesterday’s event: “If you look at what we’ve done in the past, we’ve been experimenting with different price points all the time. We started with a standard subscription, then a family subscription, a student subscription, a Duo subscription.
“We have different prices in different markets [and] different subscriptions in some markets – we have daily and weekly subscriptions in some markets.
“We will continue to iterate and innovate around different prices and different pricing options.”
In April, Amazon confirmed that it would increase the prices of two of its major streaming music plans in multiple markets starting May 5.
The first of those plans is the Amazon Music Unlimited Individual Plan – meaning unlimited, on-demand streaming – for customers who are also Amazon Prime members.
Prime members were previously able to subscribe to this subscription in the US for $7.99 per month. From May this price level has increased to $8.99 per month.
Alternatively, individual Prime members in the United States can now purchase an annual subscription to Amazon Music Unlimited for $89 per year, from $79 per year.
Amazon increased the price of the Amazon Music Unlimited Individual Plan (for Prime members) in the US, UK and Canada, according to Amazon FAQ pages in each of these markets.
In addition, Amazon increased the price of its Amazon Music subscription for one device, which gives users access to the full Amazon Music Unlimited service, but is locked to a single eligible Echo or Fire TV device.
That plan was earlier $3.99 per month in the US, but has increased to $4.99 per month in May.Music company worldwide