If you love music, then there’s a good chance that you use Spotify.
Spotify offers tons of music as well as audiobooks and podcasts.
If you want to use their Premium service, however, then you’ll find that using Spotify can be quite expensive.
Why Is Spotify So Expensive? (10 Reasons)
Spotify has four different plans from which to choose.
Its cheapest plan is the Student plan which costs $4.99 a month.
The individual plan costs $9.99 a month.
The duo plan costs $12.99 a month.
Finally, the family plan costs $15.99 a month.
Spotify is expensive due to its need to fund original content, its licensing payments, its different features and their costs, the region you live in, and whether you split the costs with the family plan or not.
Let’s look at these factors in more detail.
1. Spotify Original Content Costs
Spotify produces its own podcasts and shows.
It brings together celebrities and other charming hosts to discuss a range of subjects.
Since it makes the content itself, these are all costs that Spotify has to pay in addition to its normal operational costs.
Spotify may end up paying a lot depending on the content in question.
For example, hiring a celebrity to host a podcast could become very expensive.
The benefit is that the celebrity can bring in a large audience which can help Spotify earn some of its money back.
If the podcast is a flop, then that’s money the company wasted.
Since it faces high costs, Spotify has to charge high prices for its subscription plans.
Spotify is expensive because of the costs it takes on producing original content.
2. Licensing Fees
Spotify has to pay royalties to anyone who publishes their content on it.
The dollar amount of royalties that Spotify needs to pay may vary.
For example, it may pay a well-known and popular musical star one amount and someone relatively new to the service another amount.
It all comes down to how many listens the individual and their music receive.
The more people who listen to a song or podcast, the more royalties the individual earns.
This means that Spotify has to pay a lot of money to an artist or two.
The money that Spotify generates through ads and its subscription plans isn’t all money that the company is able to keep.
Some of it goes back to the artists who put their content on Spotify.
Since it isn’t keeping all the earnings, Spotify has to ensure that it’s still making enough of a profit to operate and flourish.
Otherwise, it’s not worth running the company.
Spotify is expensive because it has to pay money to artists which cut into its overall profits.
3. High-Quality Audio
There is a lot of competition in the audio streaming market.
There are companies like iHeartRadio, Pandora Radio, Apple Music, and an assortment of others.
Each company’s goal is to have the general public listen to its content rather than to its competitors.
As such, each company needs a differentiator that sets it apart from the others.
In Spotify’s case, it focuses on premium high-quality sound.
Whether it achieves that quality of sound, however, is a matter of the listeners’ opinions.
However, it also means that you need to pay extra money to be able to listen to the better versions of the song.
Spotify tends to play songs well on its own, but one of the features it advertises is premium listening.
It saves its best audio streaming for those who pay extra for it.
The reason Spotify does this is to attract more people to its subscription plans.
For one, it means Spotify can generate a little more money each month.
Secondly, it costs the company a bit more money to stream high-quality audio.
To stream high-quality audio, the company needs to invest in better software and hardware.
Since Spotify is spending more money on itself, it needs to receive those funds from somewhere.
Spotify is expensive because it provides high-quality audio to its premium users.
4. No Ads
One of the benefits of having a subscription plan with Spotify is that you don’t hear any ads.
You’re able to listen to song after song without interruption.
As anyone who listens to music online knows, having a sudden ad interruption can ruin the groove.
As such, some people find a lot of value in Spotify Premium.
Being able to listen to music constantly without interruption is worth the price.
However, that convenience comes at a cost.
Spotify relies on ads as a revenue stream.
To ensure it still has a revenue stream, it requires those who want to forego ads to pay more money.
You’re essentially paying not to listen to ads.
This is great for the user since they can now listen to music ad-free, and it’s great for Spotify since it doesn’t lose revenue.
If anything, the company might make even more money through direct payment via a subscription plan.
Some users may feel that they shouldn’t have to pay to avoid ads.
As such, they might feel that the subscription plans are more expensive than they’re worth.
Spotify is expensive because it allows users to skip ads which it relies on as a revenue stream if they choose to pay for a subscription plan.
5. Research And Development Costs
Because of the high level of competition in audio streaming, Spotify has to regularly come out with new features or other attractions to bring people to its service.
To find out what new features its users are interested in, it needs to research.
Spotify might poll its users to determine certain pain points.
Then it can develop new services or features aimed at solving those problems.
Not only does this encourage its current user base to stay with the platform, but it can also encourage new users to sign onto the platform.
Spotify also needs to stay relevant by regularly releasing new features.
If it can make itself more accessible, then more people might have an interest in trying out the platform.
Knowing what type of content people have an interest in can also help Spotify attract people to its platform.
The problem with research is that it costs money.
Spotify has to fund its research and development team.
The more funding the team has, the faster it can work.
They’re able to try out different prototypes and see which ones work the best.
Since Spotify spends a good amount of money on its research and development team, it ends up having high operational costs.
To cover those costs, it needs to have high prices on its plans.
Spotify is expensive because of its research and development costs.
6. High Marketing Costs
Because of the competition that it faces, Spotify also needs to spend a lot of money on its marketing.
The moment that it skimps on its marketing is the moment it gives the chance to its competitors to take over.
If Spotify isn’t constantly telling its users that it’s the only audio streaming platform they need, then its competitors might do so instead.
That might make some users leave Spotify which reduces how much money it generates.
Marketing can be pretty expensive.
Spotify has to buy ad space in prime locations to reach as many users as possible.
It also sometimes pays celebrities to advertise the platform.
Celebrities are quite expensive, too, since they influence a lot of people.
The more money Spotify spends on its marketing, the more money it needs to generate to cover that cost and other costs.
To be able to do so, it needs to set high prices on its subscription plans.
The more expensive its costs become, the higher its subscription plan prices will climb.
Spotify is expensive because of the costs associated with marketing.
7. Region-Specific Taxes
Depending on where you live, Spotify might be even more expensive.
In the UK, for example, Spotify charges its users additional taxes.
It’s called the value-added tax, or VAT.
The UK has a high VAT rate of 20%.
As such, listeners in the UK end up with 20% higher costs than other countries that don’t have VAT.
Many countries in Europe and Asia have a VAT system.
It essentially gives everyone involved in the manufacturing and distributing of a product a tax credit.
The consumer pays taxes when they purchase the product.
The United States doesn’t use a VAT system.
Instead, it uses sales tax at the state and local levels.
Since those in the United States don’t have a VAT system, Spotify is a bit cheaper.
Those who live in the UK, in particular, tend to face higher prices when it comes to Spotify as a result.
As such, depending on where you live, Spotify could easily be a bit more expensive than in other places.
8. Value Doesn’t Match Features
While some people might enjoy the features and bonuses they receive through Spotify Premium, others might not.
Spotify Premium offers the following benefits:
- Offline play
- Ad-free music streaming
- On-demand playback
- Blocking of explicit music
- Access to Spotify Kids
- SHOWTIME and Hulu access
Other audio streaming platforms offer similar benefits.
Some even offer some of these features for free.
As such, a user might not find the value that Spotify Premium provides to be worth the high cost.
Spotify is expensive to some because not everyone sees the value in what you get based on what you pay to the platform.
9. Family Plan
Of all the plans that Spotify Premium offers, the family plan is the most expensive.
The family plan has the following benefits:
- 6 Premium accounts for family members in the same house
- Ability to block explicit music
- Ad-free streaming
- Ability to play music offline
- On-demand playback
- Access to Spotify kids
At $15.99 a month, it’s quite expensive for this small list of features.
For example, it doesn’t include access to Hulu or SHOWTIME.
Based on the features alone, some may not think it’s worth the high price.
Spotify may also believe that those on the family plan are sharing the cost so it’s cheaper for each person on the plan.
Split two or three ways, the price becomes a bit more affordable.
If you’re paying that amount on your own, however, the price may be too expensive based on the features that you receive.
Spotify is expensive when you’re paying for the family plan on your own.
10. Extra Features Costs
Spotify offers some special features with its subscription plans.
The cost of offering those features is one of the reasons why the plans might be as expensive as they are.
For example, to have ad-free music, Spotify has to make its money back in another way.
That way is by having expensive subscription plans.
It costs the company more money to offer the ability to play music offline or have on-demand playback.
To ensure they can provide the service, the company has to have the funds available.
It receives those funds through subscription plans and money made from ads.
Spotify is expensive because of the costs it takes on by providing extra features.