The Ledger: How Much More Revenue Can Streaming Price Hikes Bring? 

The Ledger: How Much More Revenue Can Streaming Price Hikes Bring? 

If Spotify follows Apple Music’s decision about raising music subscription prices, hundreds and millions of dollars more will flow to creators, rights holders, and services.

music streaming

Maarten Wouters/GI

The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. The newsletter can also be accessed online in an abbreviated form.

Apple Music’s recent price hike and a possible future price hike by Spotify would boost U.S. and global music revenues, and also impact catalog valuations.

In the United States, higher prices for Apple Music and Spotify’s individual plans could result in hundreds of millions in additional subscription revenue each year. Incremental revenues resulting from these price increases have the potential to reach roughly $650 million a year for streaming services. That assumes 7% growth in subscribers in 2023, no additional churn, a full year of higher prices and higher prices for both self-paid and promotional subscription plans.

Spotify will not raise rates at the start of the year, although there is some churn. Not all subscription plans are subject for an increase. (Apple is not raising the price on Apple Music Voice, for example.) The actual impact will likely be lower in the next year and subsequent years.

Apple Music’s individual plans rose by $1 from $9. 99 to $10. 99 per month, while its family plan price increased $2 from $14. 99 to $16.99. Apple One includes Apple Music, Apple TV , and other services. It costs $2 for the individual plan and $3 per person for the family plan.

Spotify could follow with similar price increases in the U.S. of $1 per individual subscription, though it may not further raise its family plan price on top of the $1 increase, to $15. 99, that it imposed in April. Spotify offers discounted plans for students at $4 99 per month. Billboard assumes that these discounted plans will not be changed.

Creators and rights holders get a price rise. The streaming service’s revenue would be split equally into royalties to labels or publishers. Higher prices won’t affect listening habits, although some churning is possible. Creators and rights owners would benefit from the math: A larger royalty pool would be divided equally by the same number streams to calculate the per stream royalty owed each track.

Higher rates from the two biggest subscription services in the U.S. will make songwriting and recording more valuable. Price increases will increase a catalog’s royalty income. Streaming growth has been positively associated with higher music catalog valuations. As Billboard reported this week, a new paper by New York University professor Larry Miller found that streaming accounted for 62% of the average multiple paid for songwriting catalogs in 2021.

Spotify has not announced a broad price increase on its individual and family plan subscriptions, but CEO Daniel Ek signaled the company would likely follow Apple Music’s lead when speaking to investors during Spotify’s Oct. 25 earnings call. Ek stated that a price increase in the U.S. is something Spotify would like to do. He also said that he will be speaking with labels during the company’s Oct. 503 earnings call.

Expect higher prices to become the norm. Amazon Music Unlimited raised its prices for May. Deezer raised its subscription prices for France, its largest market in January, and plans to increase rates in Germany and the U.S. in November. Apple Music’s decision to raise prices “opens the door for further price increases down the line,” Deezer CEO Jeronimo Folgueira said during its Oct. 28 earnings call. There are many variables that can affect the amount of incremental revenue these price hikes generate. In any case, creators and rights owners can expect more subscription royalties in 2023 and beyond.

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