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If Spotify just increased its subscriber count by 21%, why are its prices going up?

If Spotify just increased its subscriber count by 21%, why are its prices going up?

The last few weeks have been jam-packed with Spotify announcements. The music streaming giant made some big moves, from its first hardware product to an all-new redesigned desktop experience. None are quite as controversial as yesterday’s price hikes, raising subscription fees for customers throughout much of the world. All eyes have been focused on the company’s Q1 earnings report, as rumors of a potential slowdown in subscribers swelled over the weekend. However, that doesn’t seem to be the case.

Total monthly users (or MAUs) are key to this quarter’s earnings report. Although Spotify claims user variability has increased, the company highlights 356 million MAUs for Q1, up 11 million since last quarter and 70 million year-over-year. That’s below internal expectations, but it’s not the significant drop in listeners many were expecting. Both total MAUs and paying subscribers are up by 24% and 21% respectively from this time last year. Those are some pretty solid numbers, but there might be another clue as to why subscription costs are rising.

While total revenue did see an increase of 16%, the average revenue per Premium user (ARPU) dropped 7% year-over-year to $4.97. Spotify notes its price hikes as a way to combat decreasing ARPU, highlighting limited impact in the 30 markets where Premium costs have already risen. Overall, the company expects a lower range of MAUs for 2021 but has increased its projections for both total revenue and gross margin.

Even with an explanation in place, it’s unlikely these reports will console Spotify subscriptions upset with yesterday’s news. It also comes at a time when the streaming service has been under fire following accusations that it’s underpaying artists, which led to the launch of a dedicated transparency website in March to combat its growing negative reputation.

Perhaps the only group not upset with Spotify at the moment: podcasters. In addition to new paid tiers for podcasts announced yesterday, exclusives like The Joe Rogan Experience and Renegades: Born in the USA have both overperformed. So if you’ve been wondering why Spotify continues to push its shows to the forefront of the app while you’re trying to load up your Discover Weekly mix, well, now you know.

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