that he is increasing prices for some premium subscribers. One bullish argument for Spotify’s stock is that higher prices will mean higher margins over time.
On that score, Spotify disappointed on Tuesday. Ek said the gross margin in the three months to Sept. 30 would be 26%, which is only a slight improvement from the last quarter’s 24%. And he didn’t give any encouraging longer-term signals. Shares in Spotify dropped 12%. There are two reasons for hope. First, some of Spotify’s customers pay annually, which means the price hike might take a while to come through. Second, Ek has a good reason to stay coy. He’s locked in a long-term standoff with major labels like Universal Music Group
, which currently grab the overwhelming majority of Spotify’s revenue. If the streamer sounds too positive about the trajectory of its margins, the labels might see it as an invitation to play hardball. In other words, Spotify’s future may be rosier than Ek is willing to let on.
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