Consumers' will to absorb Spotify price hike is 'very strong'

Spotify (SPOT) has announced it will once again hike the prices of its subscriptions in the US. KeyBanc Managing Director Justin Patterson joins Morning Brief to discuss the move and how consumers are responding.

"We look at our last audio survey, which was published just right around the time of that price increase. We actually saw that consumer willingness to absorb another price increase remained very strong," Patterson explains. He adds that the company has added "a lot" of value to its platform with new features like audiobooks and AI playlist recommendations, as well as video integration to podcasts.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Melanie Riehl.

Video Transcript

Spotify, they are hiking prices again, how much is too much, you know, it's uh an area that we're always very focused on with our survey where uh Spotify has been one of our top ideas for quite some time.

Now, we look at our last audio survey which was published, uh just right around the time of that price increase, we actually saw that uh consumer willingness to absorb another price increase remained very strong.

So you kind of step back and look at it.

Spotify has added a lot of value to its service over the past year with audio books uh with new features around gen A I playlist recommendations in there that it looks like this should be going through uh relatively easily.

Do they need to take another stab at video?

Justin Spotify on video?

I mean, you're seeing it already a little bit today where if you go in the app, you actually see a lot of music video embedded within there.

Uh The podcast side actually does have quite a few podcasts and video advertisements around it right now.

So there's a lot of ways to win with Spotify here, right?

And, and and I guess I asked that because of the success that they've seen podcasts, a lot of those podcasts are becoming very common podcasts now.

So it seems like there could be some type of potential play where they would see even more of those core users say.

All right, I wouldn't mind viewing the same podcast that I'm listening to, especially when those podcasts are popping up in different cities doing their own tours and whatnot.

For sure.

For sure.

You certainly see it with the uh Ringer Bill Simmons and his platform on Spotify where uh there's a lot more just live streaming of video on there.

And that does result in a higher, higher price ad because a video ad is usually worth more than an audio ad in there.

That's one lever to just drive engagement, drive revenue on the Spotify side and actually just going back to your tiktok point from earlier, there was an investor concern that tiktok Music would come to the US.

So you can actually view Spotify as a beneficiary from this too where if uh tiktok you know, is held up on the US side on the social front, you're certainly not going to see a music app here anytime soon, the competitive landscape for Spotify still looks very strong today.

Interesting.

Ok, Justin Patterson Key Bank managing director.

Thanks so much, Justin.

Appreciate the breakdown and walking us through both meta and Spotify here this morning.

Thank you.