Spotify shares have been on fire this year, rising more than 110% so far in 2023, much of that owing to investor optimism that we’ll likely see a price increase this year. But if TikTok can keep users on the platform for both discovery and consumption, it does not bode well for Spotify or its competitors. Even though Spotify currently dominates the music streaming market, TikTok is a very real threat.Īs TikTok grew, its music discovery capabilities actually boosted music consumption on platforms such as Spotify. This comes as TikTok also announced that it has begun testing TikTok Music, a subscription-based music streaming service, in Australia, Mexico and Singapore. Last week, Warner Music Group announced an expanded licensing partnership with TikTok, a deal that will leverage TikTok’s massive user base and create new revenue opportunities for WMG artists. The clock is ticking, and the major record labels are losing their patience. Spotify first announced the idea in 2021 and refers internally to the option as “Supremium.” The hi-fi option would be another way to drive up revenue at the company during a challenging time for music streaming profitability. In addition to price increases, it was previously reported that Spotify was also considering a new, more expensive subscription option that features high-fidelity audio. After all, Spotify has experimented with price increases in other regions, and what better time to announce than during the Q2 earnings results? He has said on multiple occasions that we could see a price increase in the U.S. Spotify CEO Daniel Ek is very aware of the benefits of such a move. And even though consumers grumble about it, there’s no denying the impact it has on average revenue per user (ARPU) growth. Just look at video streamer Netflix, which raised prices three times in the past four years. The most obvious way to effectively monetize would be by increasing prices on plans. And revenue per hour streaming of music for Spotify is four times lower than for Netflix, Goldman Sachs estimated. However, revenue per audio stream has fallen 14% during the same time period. In fact, the number of streaming hours on Spotify increased nearly five times between 20, according to Goldman Sachs. That’s not to say music streaming consumption isn’t way up. Music streaming has been chronically undermonetized, especially compared with its video counterparts. With no end in sight for economic uncertainty, an advertising slowdown and growing competition, many are worried recent declines in music streaming revenues could be more than just temporary. since its launch in 2011.īut times are different, and the concerns weighing on the video streaming business are also putting pressure on the music side. As the biggest music streaming player, Spotify has managed to grow while maintaining its $9.99 a month price tag in the U.S. Price increases aren’t exactly thrilling news from a consumer perspective, but they are imperative from an investor's vantage point.
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