Spotify to Raise Subscription Prices — But Still Pay Artists Even Less

Spotify will raise the price of its paid subscriptions by the end of the month, marking the platform's second price increase within a year. In 2023, individual price plans were raised to $10.99. Now, paid individual subscriptions will cost users roughly $1 more than their current rate. Family and Duo plans, which cost $16.99 and $14.99 respectively, will increase by two dollars.

Per Bloomberg, these changes will begin in the United Kingdom, Australia, Pakistan, and "two other markets," but are set to expand to the United States before the end of 2024.

Despite these heightened prices, musicians, publishers and songwriters are set to make even less money than their already low rates.

Research by Headphonesty found that Spotify's average payout was $0.0032 per stream in 2023, meaning that an album or song with over 1.5 million streams would garner less than $5,000. Spotify's staggeringly low rates have come under fire for years. In 2014, Taylor Swift temporarily removed her catalogue from the platform, citing their low royalty rates.

The streaming giant is in the midst of centering its audiobook features, having heavily promoted audiobooks within the past year. However, this extra feature impacts musicians' ability to bring in income.

Spotify added an Audiobook Access Plan last month, which costs $9.99 monthly and gives users access to 15 hours of audio books --but no ad-free music. Subscription packages that include both music and audiobooks are now "bundles," allowing the platform to reduce royalty rates for artists.

These bundle prices stem from a 2022 settlement when judges ruled that songwriters and music publishers would be paid a 15.2% headline rate in 2024. The rate is set to increase to 15.35% by 2027. However, Spotify's addition of an audiobook subscription tier renders this increased rate moot as the legal decision carved out an exception for bundles.

A representative for Spotify said, "As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers."

"Multiple DSPs have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent," they added.

In 2023, National Music Publishers' Association (NMPA) President and CEO David Israelite announced that, "Starting January 1, songwriters will enjoy the highest rates in the world and the highest rates in the history of digital streaming."

Now, Israelite has harsh words for Spotify. He believes that this new bundling system has backtracked the progress that the 2022 settlement brought about.

"Spotify's attempt to radically reduce songwriter payments by reclassifying their music service as an audiobook bundle is a cynical, and potentially unlawful, move that ends our period of relative peace," he said.

Artists make more money off of users with paid subscriptions than those who only use the free service. An increase in paid subscription costs could discourage users from staying with Spotify, leading to further income loss for musicians.

Amid this setback for artists, Spotify's stock soared to a nearly 15% increase between April 22 and April 23. As of Tuesday morning, a share of Spotify (SPOT) sits at roughly $312. This increase comes as the platform garnered an unexpected number of paid subscribers during 2024 Q1. Spotify notoriously fails to churn a profit, but has recently "committed to multiple rounds of layoffs in addition to price increases and other initiatives to boost top-line growth and improve margins."

Tags

Spotify, Music industry