Subscription Prices Gone Wild

Most platform subscription price are going up, not down—and many are skyrocketing.

Music streaming is one more example. Spotify’s Chief Business Officer recently offered the bland observation that price hikes are “part of our toolbox now”—and added “we’ll do it when it makes sense.”

What does that really mean?

According to a recent report from Goldman Sachs, Spotify subscribers should expect regular prices increases from Spotify in the future—with a boost coming every 12-24 months.

Spotify even bragged to the investment community that it’s always planning a price boost somewhere. Here again is the Chief Business Officer laying it out for us:

I want to also remind you that we take a portfolio approach. So in a sense, you could say that we raise all the time. For instance, in the last quarter we raised in France, Belgium, the Netherlands, and Luxembourg. And I can report to you that on churn, we didn’t see anything out of the ordinary for Spotify.

Years ago, I claimed that streaming economics were broken, and price increases were inevitable. But I never anticipated the rapacious response of the suits in the C-suite.

The short explanation is that they do it because they can. Sure, some people cancel their subscriptions, but not enough to make a difference. Most subscribers simply put up with it.

That’s why the streamers keep boosting prices again and again. They will continue doing it until they encounter serious resistance—and they haven’t hit it yet. So I expect more of the same.

But there’s a danger to this business strategy. Look at Las Vegas, where tourism is collapsing because the casinos went too far. For a long time, the public didn’t flinch in the face of price hikes, but then it got ridiculous:

• $95 ATM fees

• $14 coffee

• $50 early check-in fees

• $30 cocktails

The casinos have now earned a reputation as exploitative price-gougers. Tourism is now down sharply—hotel occupancy has dropped 15%. The city feels “eerily empty.”

This isn’t easy to fix. Once you destroy your reputation and lose the customer’s trust, it’s almost impossible to get it back. That happened in an earlier day to Sears and K-Mart, and they never recovered.

Something similar may already be happening at Disney’s theme parks. Some visitors report that Disney World is empty—looking like a ghost town even during Labor Day weekend.

by Ted Gioia, Honest Broker |  Read more:

Image: Daniel Parris, Stat Significant

[ed. May have to go back to cable (horrors). Just canceled my Amazon Prime account. See also: Is TV's Golden Age (Officially) Over? A Statistical Analysis.]