Spotify’s Record Profits: Is it the Price Hike or the Innovation?

Spotify has announced another record profit for the second quarter, marking a significant turnaround since it raised its Premium subscription prices for the first time last year.

The Swedish audio streaming service posted an operating income of 266 million euros ($289 million) for the quarter, a notable improvement compared to a loss of 247 million euros ($268 million) in the same period last year. Additionally, the number of monthly active users climbed 14% year-over-year to reach 626 million.

CEO Daniel Ek expressed enthusiasm about the company’s progress, stating, “It’s an exciting time at Spotify. We keep on innovating and showing that we aren’t just a great product, but increasingly also a great business. We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future.”

Following the positive earnings report, Spotify’s stock surged nearly 14% in pre-market trading on Tuesday.

In June, Spotify announced an increase in Premium subscription prices for U.S. users starting this month. Individual plan subscribers will see a $1 increase to $12, Duo plan users will pay $2 more to reach $17, and Family plan users will pay $3 more, bringing the total to $20. This followed an average price increase of $1 last July, the first adjustment in 13 years.

Despite these price hikes, Spotify reported an addition of seven million net subscribers during the quarter, surpassing its prior forecast by one million.

As the world’s leading audio streaming service, Spotify users are among the least likely to cancel their subscriptions, according to a Bloomberg analysis. However, the company has faced challenges in its financial performance, with its stock plummeting over two-thirds in value during 2022 amid several quarters of operational losses. In early 2023, Spotify announced cuts of 600 staff members, followed by a further reduction of 1,500 jobs, approximately 17% of its workforce, less than a year later.

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