Spotify Technology will introduce a new, higher-priced premium plan for its most ardent users later this year, according to a person familiar with the plan. Users will be charged at least US$5 more per month for access to better audio and new tools for creating playlists and managing their song libraries, said the person.

Spotify will position this new option as an add-on for existing customers. That means most users will remain on their current Spotify plans, but customers who choose to upgrade will generate additional sales for the company and its business partners.

The new tier’s pricing will vary depending on each user’s base plan but will average out to about a 40% markup, said the person, who asked not to be identified because they weren’t authorised to speak about the issue. Spotify’s main plan costs R65/month in South Africa, significantly below the $12 (R223)/month it costs in the US.

Among the perks for upgraded subscribers will be access to high-fidelity audio. Spotify announced its HiFi audio feature in February 2021, but delayed the roll-out. Since then, competitors like Amazon Music and Apple Music began offering higher-quality audio as part of their standard plans.

After years of charging its customers one price for access to its service, regardless of how much people used the product, Spotify has started to create multiple price points for different kinds of users.

The plan for the new subscription tier comes after price hikes for Spotify users around the world. Just last week, the company said it would raise prices in the US by $1 per month in July, bringing its standard paid tier up to $12/month. It increased the subscription price last year to $11/month from $10 after not having touched its price for more than 10 years.

Custom playlists

For Spotify, the premium plan could generate hundreds of millions of dollars in additional revenue, which would then be shared with music rights holders. It’s unclear how many people want to willingly increase their subscription bill for playlisting tools and higher fidelity audio, especially given high-quality audio hasn’t provided a huge lift to other services.

Subscribers to the new tier will also be able to instantly generate custom playlists for certain activities, dates and times of the year. The playlists will learn and adapt to each user based on their behaviour and eventually develop playlists without prompting. — Ashley Carman and Lucas Shaw, (c) 2024 Bloomberg LP