Spotify (SPOT) CEO Daniel Ek suggested more price increases are to come as the audio giant plans to offer various subscription plans to attract as many users as possible.
“A huge part in this next phase of Spotify is really to allow for more flexibility for consumers,” Ek said during the company’s first quarter earnings call Tuesday morning.
“We’re constantly looking at how much value we’re adding, how consumers in that market are responding to the value that we’re adding, and then what is the fair price to have a good value to price ratio.”
Spotify boosted the cost of certain subscription plans last summer. The company hinted it plans to raise prices once again after last year’s various price hikes “had minimal impacts on growth.”
“The more value we create, the more ability we will have to then capture some of that value by price increases,” Ek said.
According to Bloomberg, Spotify plans to increase prices by about $1 to $2 a month in five markets, including the UK, Australia, and Pakistan. The changes are expected to come at the end of April, with US prices to rise “later this year.”
The report also said Spotify plans to introduce a cheaper option that does not include audiobooks — something Daniel Ek confirmed during Tuesday’s call.
“We want to offer as much flexibility as possible in this next stage of Spotify because we are at the size where we want to appeal to an even larger base of consumers,” he said. “That obviously means you’ll see things like, for instance, the audiobook-only tier. …You should also expect to see a music-only tier as well.”
Ek did not reveal when the streamer plans to raise prices or roll out the new tiers.
Spotify shares soared in early trading on Tuesday after the company turned a profit in the first quarter and beat on most of its key metrics. It also guided to higher revenue and operating income for the second quarter.
Over the past year, Spotify has committed to multiple rounds of layoffs in addition to price increases and other initiatives to improve profitability. The company said it will be more intentional about future investments after spending billions on its push into the crowded podcast market.
“SPOT continues to execute well and drive improved profitability across music, podcasts, & marketplace,” JPMorgan analyst Doug Anmuth wrote in reaction to the results. “We believe SPOT’s strong progress toward its medium-term financial targets of 30% to 40% gross margins and 10%+ operating margin will support strength in shares.”
One downside to the quarterly report was monthly active users (MUAs), which came in below company estimates of 618 million to hit 615 million in the quarter. The company guided to second quarter MUAs of 631 million, slightly lighter than Wall Street expectations.
Ek gave several reasons for the miss, saying that user growth accelerated in 2023 at a rate that should not be expected every year. He also said the company’s December layoffs disrupted day-to-day operations to start the year, while the company also pulled back “too significantly” on marketing spend.
“I have no doubt that we will be able to recapture top-of-the-funnel growth over time as it becomes more of a focus area for the team,” Ek said, emphasizing that (at least for now) the company is focused on accelerating revenue while improving the bottom line.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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