The Ledger is a weekly newsletter about the economics of the music business, sent to Billboard Pro subscribers. An abridged version of the newsletter will be published online.
Apple Music’s recent subscription price increase and a likely imminent Spotify price hike would boost music revenues in the US and worldwide, and also affect catalog valuations.
Higher prices for Apple Music and Spotify’s single plan could be worth hundreds of millions in additional subscription revenue annually in the US potential to reach around $650 million per year for streaming services. This assumes 7% subscriber growth in 2023, no additional churn, a full year of higher prices and higher prices for both self-paid and promotional subscriptions.
However, a small amount of churn is possible, and Spotify is unlikely to increase rates earlier in the year. Additionally, not all subscription plans are subject to an increase. (Apple isn’t increasing the price of Apple Music Voice, for example.) So the actual impact over the next year and years to come is likely to be smaller.
Apple Music’s individual plans increased by $1 from $9.99 to $10.99 per month, while the price of the family plan increased by $2 from $14.99 to $16.99 US dollar rose. Apple One, a bundle that includes Apple Music, Apple TV+, and other services, rose $2 for the Individual plan and $3 for the Family plan (which includes Apple Arcade and iCloud+) and Premier plan (which includes Apple News+ and Apple Fitness+ added).
Spotify could follow with similar price increases in the US from $1 per individual subscription, though it may not increase the price of the family plan further to the $1 to $15.99 increase it imposed in April . Spotify also has student discount plans that cost $4.99 per month. For these purposes, Billboard assumes these discounted plans will remain unaffected.
Creators and rights holders are effectively getting a pay raise through a price increase. The same percentage of the streaming services’ earnings would go to labels and publishers as royalties. Higher prices wouldn’t impact listening habits—although some churn is possible—so the math is favorable for creators and rightsholders: A larger royalty pool would be divided by the same number of streams to account for per-stream royalties owed for each title to calculate .
Higher tariffs from the two largest subscription services in the US would also make songwriting and recording catalogs more valuable. Price increases add revenue to a catalog’s existing royalty income, and streaming growth is positively correlated with higher music catalog valuations. As billboard reported this week on a new paper by a New York University professor Larry Miller found that streaming accounted for 62% of average multiple paid songwriting catalogs in 2021.
Spotify hasn’t announced a broad price increase for its individual and family plan subscriptions, but CEO has Daniel Ek signaled that the company would likely follow Apple Music’s lead in speaking to investors during Spotify’s Oct. 25 earnings call. A US price hike “is one of the things we’d like to do,” Ek told investors, adding Spotify will be in talks with labels “given these recent developments with our label partners.”
Expect higher prices to become the norm. Amazon Music Unlimited increased its prices in May. Deezer raised its subscription prices in France, its largest market, in January and plans price increases in Germany and the US in December. Apple Music’s decision to raise prices “opens the door for more price increases in the future,” according to Deezer CEO Jeronimo Folgueira said during his earnings call on Oct. 28. Exactly how much additional revenue these price increases will generate depends on many variables. Either way, creators and rights holders can expect more subscription fees in 2023 and beyond.
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