While industry insiders have suggested that a $5 price point is an ideal monthly streaming amount as far as maximizing growth, major labels have generally forced platforms' hand closer to a $9.99 charge. A new dip into Spotify's finances, however, has revealed that the average user of that platform is only shelling out about $5.50 per month.
Guest post by Bobby Owsinski of Music 3.0
For years various music industry insiders have said that the average price for a streaming music subscription should be in the $5 per month range in order to maximize growth. The major record labels have worked hard to keep the price as high as possible however, with the preferred U.S. price at $9.99 per month thanks to their license agreements. That said, a recent deep dive into Spotify’s revenue statements have discovered that the average price is really about $5.50 anyway.
The fact of the matter is that the monthly price for a Spotify or Apple Music subscription varies from country to country and is set at what the market will bear. For instance, in Vietnam, where Spotify recently launched, the average monthly subscription is around $2.50, and when it launches in India soon the price will be even less at less than $2.00. In the UAE it’s $5 while only $3 in Egypt.
And the biggest diluter of average monthly revenue per user is the Family Plan, where up to 6 users can be on the same account for just $14.99 per month. No problem if it’s really a family that’s signed up, but more and more people get around this by having their friends on a family plan, which Spotify is trying to crack down on.
The fact is that the record labels would like Spotify to raise its prices, noting that Netflix has successfully done so 3 times in recent times while the company has yet to try a increase.
Of course there’s a tradeoff here. Do you go for more revenue and fewer customers or more customers with less revenue?
This is no doubt going to be a theme in 2019 as Spotify struggles to be profitable while under market pressure. That said, it’s subscriber numbers continue to grow on both the free and premium tier so expect the status quo until that changes.