What's Next For Spotify? More Price Hikes Could Be Coming After Strong Q2 Performance - Spotify Technology (NYSE:SPOT)

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In Tuesday’s second-quarter earnings call, Spotify Technology SA‘s SPOT CEO Daniel Ek and interim CFO Ben Kung hinted at the possibility of future price increases, despite not providing a concrete timeline. This comes on the heels of substantial hikes in 2023 and 2024, where the price of an individual plan in the U.S. rose from $9.99 to $11.99 per month. See Also: Spotify Smashes Gross Margin Guidance, Analysts Expect ‘Continued Momentum’ Subscribers Stay Despite Price Hikes Spotify’s strategic decision to raise prices did not result in subscriber loss or revenue decline. In the second quarter of 2024, Spotify added 7 million new subscribers, surpassing its own expectations by 1 million. The company reported a revenue of €3.8 billion ($4.15 billion), marking a 20% year-over-year increase. These gains helped Spotify swing from a €247 million ($269 million) operating loss in Q2 2023 to a €266 million ($290 million) operating profit in Q2 2024. According to Billboard, Ek said that the company saw “less churn in this round of increases than we did in our prior one, which was already very low by any measure.” Kung added that churn rates following the recent price hikes were “better than expected.” Enhanced Value and Retention Ek attributes the low churn rates to the enhanced value Spotify has delivered over the years. The streaming giant has evolved into a comprehensive audio platform, adding popular features like the year-end Wrapped recap and Discovery Weekly playlists. The company’s significant investments in podcasts and audiobooks have also broadened its appeal. Ek added: “Access to all of this content would cost a user approximately $26 — significantly more than a Spotify subscription. Spotify remains a pretty outstanding deal.” Engagement Fuels Future Increases Subscriber engagement remains crucial for Spotify’s strategy. Kung noted: “The most important thing in the near term is just making sure that audiobooks are driving incremental engagement for the platform, and we're seeing this happening in a way that makes us feel good about the path that we're on here.” Ek also suggested that developing markets, which currently favor ad-supported listening, show high engagement levels that could justify future price increases. “The high engagement in [developing] markets gives us tremendous confidence in our ability to raise prices,” he said. The HiFi Experience Spotify is also targeting a subset of subscribers willing to pay more for an enhanced experience. After initially announcing a high-quality audio tier called HiFi in 2021 and subsequently delaying it, Ek confirmed its impending launch. “ The plan here is to offer a much better version of Spotify,” he stated. This premium tier is expected to be priced around $17-$18 per month, offering superior control and quality. Read Next: Image credits: Diego Thomazini on Shutterstock.