Apple Music’s recent subscription price increase and a likely forthcoming price hike by Spotify would provide a boost to U.S. and global music revenues and likewise impact catalog valuations.
Higher prices for Apple Music and Spotify’s individual plan could be worth hundreds of millions in additional subscription revenue annually in the U.S., reports The Ledger from Billboard.
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.
However, a small amount of churn is possible, and Spotify is unlikely to raise rates at the beginning of the year. Additionally, not all subscription plans are subject to increase. (Apple is not raising the price on Apple Music Voice, for example.) Thus, the actual impact is likely to be lower next year and in successive years.
Spotify could follow with similar price increases in the U.S. of $1 per individual subscription. It may not further raise its family plan price on top of the $1 increase, to $15.99, it imposed in April. Spotify also has discounted plans for students that cost $4.99 per month. For these purposes, Billboard assumes those discounted plans will be untouched.
Creators and rights owners effectively get a raise from a price increase. The same percentage of streaming services’ revenue would flow as royalties to labels and publishers. Higher prices wouldn’t impact listening habits – although some churn is possible – so the math if favorable to creators and rights owners: a larger royalty pool would be divided by the same number of streams to calculate the per-stream royalty owed to each track.
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