2023-07-25 16:25:40
The 9.99 era in music streaming is slowly but surely coming to an end: On Monday, market leader Spotify also said goodbye to the symbolic price point for the individual subscription, which has existed since the start. The Swedish service also increased prices for combination tariffs in central markets such as the USA or Great Britain, but also in France, Italy or Austria and more than 40 other smaller markets.
What is striking is that Germany, the fourth largest market for music recordings in the world after America, Great Britain and Japan, is not on the list, and the 9.99 euros will remain here for the time being. At the request of the FAZ, Spotify initially did not comment on any planned increases in this country.
The step did not come as a surprise, after all, the competition had already pushed ahead. After many years of reluctance, it was initially the French service Deezer that raised the prices. 10.99 instead of 9.99 (dollars, euros or pounds) then gradually became the new standard, which is now also slowly finding its way into Spotify: A few months later, in October last year, Apple followed, then Amazon at the beginning of 2023 and again a few months later Tidal and Youtube Music. With all of these providers – with the exception of Youtube – the price also increased in Germany from 9.99 to 10.99 euros. In contrast to Spotify and Youtube Music, they also offer hi-fi sound.
However, there was nothing official from the service about a possible hi-fi subscription from Spotify, upgraded with other offers such as audio books and thus more expensive, about which the Bloomberg news agency recently reported, even when the figures for the second quarter were presented – apart from the general comment that hi-fi was of course an interesting option.
10 million new subscribers
Spotify on Tuesday reported an increase of 10 million subscribers compared to the first quarter of this year. So now there are 220 million subscribers and 551 million monthly active users (as of the end of June). The number of users even increased by 36 million. Both values were above the previously given forecast of growth to 217 million subscribers and 530 million active users. Compared to the same quarter of the previous year, sales increased by 11 percent to 3.177 billion euros and thus remained slightly below the forecast of 3.2 billion. The subscription business contributed 2.77 billion euros (plus 11 percent), 404 million euros from advertising (plus 12 percent).
According to Spotify, the record increase in monthly active users (quarterly comparison) results in a strong increase in young listeners from “Gen Z”. Above all, there was growth in Latin America as well as Asia and Africa. The plus was particularly high among users of the advertising-based free version, at 34 percent to 343 million compared to the previous year. The regions of Europe and Latin America in particular stood out in the acquisition of new subscribers, supported by marketing campaigns.
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The average revenue per subscriber (called ARPU, “premium average revenue per user”) fell slightly compared to the first quarter from EUR 4.32 to EUR 4.27. In addition to the cheaper combination tariffs, this also reflects the growth in markets with lower price levels than in Germany, for example. The price increases are not likely to have a particularly strong impact here in the third quarter because they will not take effect immediately, but a noticeable effect is expected in the fourth quarter, Daniel Ek said in an interview with investors.
Spotify wants to pay more attention to efficiency
At 24.1 percent, the gross margin, a value that has recently been the focus of investors, was below the forecast (25.5 percent), while the bottom line was a minus of 302 million euros – after a loss of 125 million euros in the second quarter of last year. Spotify pointed out that the margin had been negatively impacted primarily by the discontinuation of various podcasts and the resulting costs of EUR 44 million. The adjusted gross margin without this factor amounts to the forecast 25.5 percent. The adjusted operating loss of 112 million euros is even slightly above the forecast (129 million euros), if you calculate out the costs for the restructuring and severance payments in the course of the second wave of layoffs in the current year. Taking costs into account, the operating loss was 247 million euros. Spotify also referred to higher, though unspecified, payments for music licensing.
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