the wider economy. It was one of the first industries to be disrupted by the Internet, and the first to repackage itself as all-you-can-eat rather than all-you-can-steal. The status quo has been the norm for a while: Napster was wound down two decades ago, its nemesis Metallica embraced streaming platforms more than a decade ago, and Spotify Technology’s subscription prices have stayed around US$9.99 for years.
Nor has it been good for shareholders of Spotify or similar standalone music streaming platforms like Deezer, with tough competition in a saturated market threatening their pitch as high-growth tech plays. Platforms also have limited negotiating power with the record labels and rights holders who are keen to maximise the value of their hit songs and star artists.
Higher prices would certainly enlarge the overall economic pie. It might even create some incentives to change the unequal way subscription fees flow into an overall pot that favours the biggest artists regardless of what individual subscribers choose to play.But the halving of Spotify’s stock price last year indicates that this move is fraught with risk. Nobody can predict what price hikes will do to demand in a fragile economy.
Yet here again, the risks are high. The story of different audio streams converging and fattening profit margins is taking a long time to come to fruition; Jefferies analysts expect Spotify’s gross margins to be below 2021 levels until 2024. The podcasting bubble has also deflated, with no guarantee that Spotify’s move into the spoken word will be profitable this year. Audiobooks look like yet another long-term journey.