Spotify (SPOT) reported multiple record quarterly earnings on Tuesday after recently raising the prices of its premium subscription plans in the U.S. The company also signaled it is focused on giving consumers more choice and will introduce more expensive streaming plans.
“One of the reasons our subscription business has grown over the last year or two is because we’ve moved from one-size-fits-all plans to more customized plans,” Spotify CEO Daniel Ek said on the company’s second-quarter earnings call, referring to the company’s range of plans, from Basic and Duo to multi-family and student plans.
The company plans to introduce a more expensive premium plan later this year, Bloomberg reported in June, which will reportedly cost $5 more per month and include enhanced features such as better audio quality and more advanced tools for playlist creation and library management.
“The reason we’re doing this is because we’re a private company,” Ek told analysts on Tuesday, effectively confirming the as-yet-unannounced IPO. [because] “We think this is something consumers really want from us, and we think a very large percentage of our 246 million subscribers want it.”
“The plan here is to offer a better version of Spotify,” he said, “about $5 more than the current premium tier, so it’ll probably be in the $17 or $18 price range. It’s like a deluxe version of Spotify, with all the benefits that the regular Spotify version has, but with a lot more control and a lot higher quality overall.”
Spotify announced in June that it would increase the price of its premium subscription plans in the US, with the increases set to take effect this month. Spotify also increased its prices last summer.
“This price increase has resulted in lower churn rates than our previous price increase, which was already very low by any measure,” Ek said in the earnings call. “We believe this is due to the significant value we’ve added to our service over the past few years.”
Ek added that high engagement in developing markets like the U.S. “gives us great confidence in our ability to raise prices.”
In addition to adjusting prices, the company has made multiple job cuts and is working on initiatives to grow revenue and improve margins, including a music-only streaming tier and an audiobook-only plan, and it has also introduced more expensive audio bundles that include music, podcasts and audiobooks.
These efforts helped the streamer post record quarterly earnings, gross margins and free cash flow, sending its shares up double digits at the start of trading.
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While the company’s monthly active user numbers were disappointing, management cited “several steps we will take in the coming quarters” to improve user acquisition, including more targeted marketing efforts and strengthening its free product.
Spotify’s artificial intelligence DJ announcer, Xavier X. Jernigan, attends the launch of Spotify’s latest tools in Mexico City on July 17, 2024. (RODRIGO OROPEZA/AFP via Getty Images) (RODRIGO OROPEZA via Getty Images)
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her at Yahoo Finance. translatorvisit me on LinkedIn or email me at alexandra.canal@yahoofinance.com.
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