Spotify anticipates a 'super premium' tier for superfans and video expansion in its third quarter earnings report.
Spotify's CEO, Daniel Ek, has once again hinted at the arrival of the company's HiFi or "super premium" option, a subscription tier that will offer superior audio quality in the streaming service.
In the recent third-quarter earnings call, Spotify CEO Daniel Ek once again mentioned the highly anticipated and delayed HiFi or "super premium" subscription, a higher-quality service that was first announced in 2021 but has yet to be implemented. During the conversation with investors, Ek hinted that this new product is still on track, while also highlighting the progress the company is making in other areas, such as expanding its video offerings and introducing new AI-enhanced products.
A few years ago, Spotify had revealed plans to offer a more exclusive version of its Premium subscription, which would include features like "CD-quality lossless audio," but licensing issues led to delays, as Ek explained in 2022. Despite this, the company has continued to mention this offering in investor meetings. In July, Ek indicated that the company planned to launch a higher-tier subscription that would cost between $17 and $18 per month, about $5 more than the current subscription.
Despite competitors like Apple Music and Amazon Music having offered lossless audio streaming for some time, the reason behind Spotify's delay remains unclear. Some speculated that features like AI-generated playlists could accompany this new subscription, but instead, Spotify released that tool to its Premium subscribers earlier this year.
In recent months, Spotify's focus on its luxury offering seems to have extended beyond video. Reports indicate that major record label UMG is collaborating with Spotify to create a subscription aimed at superfans, which could include early access to new music, following an expanded partnership announced in March. According to a UMG investor presentation, 20% of streaming subscribers would be willing to pay for a combination of early music access, superior audio quality, and listening party invitations.
During the call, investors again mentioned this focus on superfans, and Ek commented that the new, higher-priced subscription would include better sound quality and a variety of additional benefits. He also emphasized that catering to superfans could be crucial for attracting this subscription. Ek stressed that the company's goal is to create something consumers love while providing value to content creators.
Regarding the "superfan" applications from record labels, Ek was cautious and did not provide details on Spotify's role in those efforts, stating only that they would be open to exploring ways to contribute if those applications generate interest among consumers. Additionally, a creator-focused event was held in Los Angeles, where the expansion of its video offerings and how to help creators reach a larger audience on the platform was announced.
Concerning artificial intelligence, Ek highlighted the success of Spotify's AI DJ feature, which has significantly boosted user engagement. However, he clarified that investment in artificial intelligence would be managed in a disciplined manner, focusing on increasing retention and engagement rather than being an irresponsible expenditure.
On Wednesday morning, Spotify shares rose more than 10% after it revealed that it had added more subscribers than expected during the quarter, along with presenting optimistic forecasts for the fourth quarter. The company reported over 640 million monthly users and an operating income of €454 million on total revenue of €4 billion, representing a 19% increase compared to the same quarter last year.
