The MBW Overview is the place we purpose our microscope in the direction of a number of the music biz’s largest latest goings-on. This time, we check out the historical past of Netflix vs. Spotify‘s subscription costs, within the wake of reports that Netflix has as soon as once more upped its charges within the US. The MBW Overview is supported by Instrumental.
There was some shiny information for the worldwide music enterprise that emerged out of the UK the opposite week.
In keeping with the Leisure Retailers’ Affiliation, client spend on subscription music streaming (i.e. the cash paid to Spotify, Apple Music et al) grew year-on-year within the UK by 10.9% in 2021.
In financial phrases, some £1.33 billion ($1.81 billion) was spent on music subscriptions within the territory final yr, up by £131 million on the identical determine from 2020.
The much less excellent news: That year-on-year development determine was considerably lower than the equal quantity from 2020, 2019, and 2018.
In different phrases: The expansion in subscription streaming spending is slowing down in one more key international music trade territory.
That’s not excellent news for both music rightsholders, or streaming companies themselves.
Might the likes of Spotify and Apple Music lastly elevating their costs from the usual $9.99/£9.99/€9.99 month-to-month price-tag be the reply?
One firm that definitely believes the market can bear a value rise (or six) is Netflix – which simply upped its subscription costs but once more within the US and Canada.
Over the weekend, the movie streaming large bumped up the price of its Customary plan, which lets subscribers stream through two screens on the similar time, from $13.99 monthly to $15.49 monthly within the US (see under).
Netflix’s Primary plan in the meantime, which solely lets subscribers stream through one display screen and obtain to at least one machine, has risen by $1, to $9.99 monthly within the US.
Netflix’s Premium plan, which lets subscribers stream through 4 completely different screens on the similar time and obtain to 4 completely different units, has gone up by $2 to $19.99 monthly (see under).
“We perceive individuals have extra leisure decisions than ever and we’re dedicated to delivering a fair higher expertise for our members,” a Netflix spokesperson informed Reuters, which broke the information of the value rises.
“We’re updating our costs in order that we will proceed to supply all kinds of high quality leisure choices. As all the time we provide a spread of plans so members can choose a value that works for his or her price range.”
In Canada, the service’s Customary plan has elevated from CAD $14.99 to CAD $16.49 and the Premium plan elevated to CAD $20.99.
The final time Netflix raised its costs within the US was in October 2020, when its Customary and Premium tiers went as much as $13.99 and $17.99 monthly, respectively, from $12.99 and $15.99 monthly, respectively.
Previous to that, Netflix’s final value improve within the US got here in January 2019, from $10.99 to $12.99 monthly for the Customary plan, and from $13.99 to $15.99 for the Premium subscription tier.
This month’s value hike within the US marks the sixth time that Netflix has raised its costs out there since 2014.
The timeline, and respective value rise of Netflix’s Customary tier within the US through the years, is as follows:
Spotify, the world’s largest audio streaming service, has charged Premium particular person subscribers within the US $9.99 monthly because it launched out there again in 2011.
Factoring in inflation, that very same amount of cash in actual phrases is value simply $8.09 at the moment.
This fixed $9.99 value level within the US doesn’t imply that Spotify is wholly in opposition to elevating costs: It raised the month-to-month value of Premium Household in 12 markets in April 2021, together with the US, the place it went up from $14.99 to $15.99.
The corporate additionally ‘examined’ a ten% value improve on its customary Premium, Pupil and Premium Household Plans in Norway in July 2018 – and people costs have remained greater ever since.
On Spotify’s Q1 2021 earnings name, founder Daniel Ek informed analysts that his firm had “carried out value will increase in additional than 30 markets” within the prior two quarters, bringing the entire variety of markets the place costs had gone up – as of Q1 2021 – to 42.
He added: “The constructive knowledge we proceed to see when it comes to the worth customers see in Spotify underscores the numerous alternative right here, and it is best to anticipate that we are going to proceed to leverage will increase as we consider market circumstances.”
Spotify additionally reported on the finish of Q3 2021 (ended September 2021) that value will increase throughout the yr had had a constructive impact on its common income per consumer (ARPU).
Spotify’s Premium ARPU was €4.34 in Q3, up 4% YoY (or up 3% Y/Y fixed forex vs. flat Y/Y in Q2). In reality, SPOT stated on the time that it “noticed a profit to ARPU primarily from our value will increase” (Italics added by MBW).
If value will increase globally have been proven to have a constructive impression on Spotify’s ARPU, the query then, is why hasn’t the corporate elevated the value of its Premium plan within the US but?
One doable motive might be to keep away from a possible slowdown in subscriber development in one in every of Spotify’s largest markets.
As of Q3 2021, North America accounted for 29% of SPOT’s complete Premium subscriber base (see under).
Subscriber development can, at the very least within the quick time period, be slowed by value rises in sure economically-sensitive territories.
In October, Netflix reported that it added 4.4 million paid “web provides” in Q3 (ended September 30 2021) – ending the quarter with 214 million paid memberships.
However the firm noticed a slowdown in paid membership development in Latin America.
On Netflix’s Q3 earnings name, Chief Monetary Officer Spencer Neumann famous that “development was just a little bit tender within the quarter” in Latin America, and pointed to a not too long ago elevated subscription costs in Brazil as a key issue for this deceleration.
Netflix reported that its revenues elevated 16% year-over-year to $7.5 billion in Q3 2021.
The MBW Overview is supported by Instrumental, one of many music trade’s main development groups for unbiased artists. Instrumental makes use of knowledge science to establish the quickest rising unbiased artists on the planet after which supply funding, premium distribution and advertising help to take them to the following stage, with out taking their rights.Music Enterprise Worldwide