By Dan Gallagher
Spotify gave investors the price hike they were looking for. Its also betting big that its subscribers wont tune out.
The music streamer announced its latest round of price increases for its U.S. plans on Monday. Investors have been banking on such a move all yearespecially since the companys first-quarter report in April, where CEO Daniel Ek confirmed such a move was coming.
Spotifys shares jumped more than 4% Monday morning, building on a 9% gain since the last earnings report. The stock is now up 65% for the year, far exceeding the gains of any other streaming provider. Netflix is up 31% for the year, by comparison.
But Spotify has long been in the uncomfortable position of competing not with other streamers, but with tech giants like Apple and Amazon that can use music streaming as a loss leader to keep users tied into their ecosystems.
That is why the latest round of hikes stands out. Spotifys family plan now costs 18% more than what Apple and Amazon charge for the same type of service, while its individual plan is now 9% more than Apples and 20% more than Amazons. Last years price changes mostly brought Spotify into parity with its giant rivals.
That may seem a risky move. But Spotify has been in the music streaming game for more than a decade now, and its scale has given it a wide base of paying subscribers whove spent years building up their own playlists and profiles on the service. A survey by Evercore ISI last year found that Spotify had the lowest percentage of users likely to cancel or switch services in the event of a $1 price increase.
Spotifys family users will see a $3 increase, though. In a note Monday, Evercore analyst Mark Mahaney said the latest hikes could introduce greater churn impact than last years round. That said, this may well be a signal of Spotifys confidence in its value proposition, competitive position, and pricing power, he added.