How much more income can they bring? – Billboard

How much more income can they bring?  – Billboard

The Ledger is a weekly newsletter about the economics of the music industry sent to Billboard Pro subscribers. An abbreviated version of the newsletter is posted online.

Apple Music’s latest subscription price hike and a likely upcoming price hike from Spotify will boost US and global music revenues and also impact catalog values.

Higher prices for Apple Music and Spotify’s individual plan could be worth hundreds of millions in additional subscription revenue annually in the US. Incremental revenues resulting from these price increases have potential to reach around $650 million a year for streaming services. That assumes 7% subscriber growth in 2023, no additional churn, a full year of higher prices, and higher prices for both prepaid and promotional subscription plans.

A small amount of churn is possible, however, and Spotify is unlikely to raise prices at the beginning of the year. In addition, not all subscription plans can be increased. (For example, Apple is not increasing the price of Apple Music Voice.) Thus, the actual effect is likely to be lower next year and in subsequent years.

Apple Music’s individual plans rose $1 from $9.99 to $10.99 per month, while the price of the family subscription increased $2 from $14.99 to $16.99. Apple One, a bundle that includes Apple Music, Apple TV+ and other services, increased $2 for the individual plan and $3 for the family plan (which includes Apple Arcade and iCloud+) and the premier plan (which adds Apple News+ and Apple Fitness+).

Spotify may follow through with similar price increases in the US of $1 per individual subscription, although it may not increase the family plan price further on top of the $1 increase, to $15.99, imposed in April. Spotify also has discounted plans for students that cost $4.99 per month. For these purposes, Billboard assumes that the discounted plans remain untouched.

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Creators and rights owners effectively get a boost from a price increase. The same percentage of streaming services’ revenue will flow as royalties to labels and publishers. Higher prices will not affect listening habits – although some churn is possible – so the calculation is favorable for creators and rights owners: a larger royalty pool will be divided by the same number of streams to calculate the royalty per stream owed to each track.

Higher prices from the two largest subscription services in the US will also make songwriting and recording catalogs more valuable. Price increases will add revenue to a catalog’s existing royalty income, and streaming growth has been positively correlated with higher valuations of music catalogs. As Billboard reported this week, a new paper by a New York University professor Larry Miller found that streaming accounted for 62% of the average multiple paid for songwriting catalogs in 2021.

Spotify has not announced a broad price increase on individual subscriptions and family subscriptions, but the CEO Daniel Ek signaled that the company would likely follow Apple Music’s lead when speaking to investors during Spotify’s Oct. 25 earnings call. A US price increase “is one of the things we want to do,” Ek told investors, adding that Spotify will have talks with labels “in light of these recent developments with our label partners.”

Expect higher prices to become the norm. Amazon Music Unlimited raised prices in May. Deezer raised subscription prices in France, its biggest market, in January and is planning rate hikes in Germany and the US in December. Apple Music’s decision to raise prices ‘opens the door for further price increases down the line’, Deezer CEO says Jeronimo Folgueira said during the Oct. 28 earnings call. Exactly how much incremental revenue these price increases will generate depends on many variables. Either way, creators and rights owners can expect more subscription fees in 2023 and beyond.

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