Spotify Technology SA (SPOT) is set to launch a new premium plan later this year, which will offer better audio quality and new playlist tools at a higher price point than the current premium plan. The stock of Spotify is trading higher on Tuesday following this announcement, with subscribers expected to pay at least $5 more per month for these additional features.
The premium plan will be an add-on for existing customers, providing Spotify with additional revenue streams. Bloomberg reports that the new tier, called “Supremium,” will have pricing that varies depending on the user’s base plan, with an average markup of 40%.
One of the key benefits for upgraded subscribers is access to high-fidelity audio, a feature that Spotify had previously announced in February 2021 but had delayed. This move puts Spotify in line with competitors like Amazon Music and Apple Music, who already offer higher-quality audio as part of their standard plans.
The introduction of this new premium plan comes after recent price increases for Spotify’s standard paid tier in the U.S. to $11.99 per month. This move is expected to significantly boost Spotify’s revenue, which is shared with music rights holders. Subscribers to the premium plan will also receive custom playlists tailored to their listening behavior.
Spotify reported a quarterly gross margin growth of 243 bps to 27.6% in April, reflecting improved profitability in both the podcast and music sectors. The number of premium subscribers increased by 14% to 239 million, showing strong growth in user numbers.
Investors interested in gaining exposure to Spotify’s stock can consider investing in ETFs such as iShares Russell Midcap Growth ETF (IWP) and iShares Russell 1000 Growth ETF (IWF). As of the latest check on Tuesday, SPOT shares were trading higher by 1.13% at $312.50