Spotify may have revealed the real reason behind its price increase.
The popular audio streaming platform revealed during its Q2 2023 earning report that it lost revenue despite a rise in its subscriber count.
Spotify recently announced it is raising the monthly subscription fees of its four Premium plans to help it innovate in an evolving market.
Suffering From Success
Spotify's Q2 2023 was a huge hit. According to its latest earnings report, the company saw its million monthly active users (MAU) climb to 551 million thanks to 36 million new subscribers. While not every new subscriber bought any of its Premium plans, their addition to Spotify's MAUs represents a 27% increase in it - a new all-time high for the company.
Despite not everyone in the 36 million new subscribers not getting a Premium plan, the ones that did help the company achieve another record. The company saw 10 million paying subscribers - three million larger than it expected - and grew its subscriber base by 17% year over year.
While this record is not an all-time high, it is the best Q2 Spotify ever had since its launch in that regard.
As for company revenue, Spotify revealed its revenue grew 11% year over year to $3.54 billion, an amount in line with company expectations. However, this success is tainted by the losses the company incurred during the quarter.
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Spotify stated it posted an adjusted operating loss of $123.7 million due to the shutdown of its podcast shows, excess real estate, and the severance pay for the employees it laid off as part of its restructuring. You may remember that Spotify has been laying off a number of its employees since 2022 to cut costs and restructure the company to help it become profitable again.
The company also axed quite a bit of original podcasts on its platform in the past, such as its "How to Save a Planet," "Crime Show," and "Medical Murders," according to a report from The Verge citing a statement from Spotify spokesperson Grey Munford.
Finally, it also revealed it is making less revenue on its monthly subscription charges despite the increase in subscribers. According to a recent report from The Verge, its average revenue per user is around $4.72 - a 6% decline year over year and a slight fall compared to previous figures (around $4.79) during Q1 2023.
To Cash In On Its Success
Considering the losses Spotify took, particularly in its average revenue per user, it is no wonder it resorted to increasing its subscription fees to help it gain revenue. Its decision to hike Premium plan prices was a move it promised investors, per The Wall Street Journal.
Spotify finally implemented its planned subscription fee increase after announcing its intention to do so last week. The company stated in its announcement that it raised its prices to keep innovating in light of the evolving market landscape it found itself in since 2008.
Spotify isn't the only one to cash in on its own success as far as its subscriber count is concerned. NBCUniversal also did the same move with its Peacock streaming platform thanks to the company doubling its paid subscriber total from nine million to 20 million subscribers in 2022.
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