Spotify CEO says consumers 'are really asking us' for a more expensive premium tier

Spotify (SPOT) posted a multi-record quarter on Tuesday after recently hiking the prices of its premium US subscription plans. The company also alluded to a more expensive streaming tier to come as the audio giant doubles down on offering more choices to consumers.

"Part of why I believe the subscription business in the last year or two has been doing better is because we've moved from that one size fits all to a much more tailored proposition," Spotify CEO Daniel Ek said during the company's second quarter earnings call, referencing the platform's various plans from its basic and duo tiers to multifamily and student offerings.

The company is set to introduce a more expensive premium plan later this year, Bloomberg reported in June. The plan will reportedly cost $5 more per month and include enhanced features, like superior audio quality and more advanced tools for creating playlists and managing libraries.

Ek all but confirmed the yet-to-be-announced offering on Tuesday, telling analysts on the call, "The reason why we're doing it is [because] we think it's something consumers really are asking us to do, and we believe there's now a very large subset of that 246 million subscribers that want it."

"The plan here is to offer a much better version of Spotify," he said. "Could be something like $5 above the current premium tier, so probably around a $17 or $18 price point. Sort of a deluxe version of Spotify that has all of the benefits that this normal Spotify version has, but a lot more control and a lot higher quality across the board."

In June, Spotify announced it would hike the prices of its premium US subscription plans, with increases set to take effect this month. Spotify previously raised prices last summer.

"We're seeing less churn in this round of increases than we did in our prior one, which was already very low by any measure," Ek said on the earnings call. "I attribute this to the tremendous value we've added to our service over the last several years."

Ek added high engagement levels in developing markets like the US "gives us tremendous confidence in our ability to raise prices."

On top of price adjustments, the company has committed to multiple rounds of layoffs and initiatives to boost top-line growth and improve margins, like a music-only streaming tier and audiobooks-only plan. It also introduced a higher-priced audio bundle that includes music, podcasts, and audiobooks.

All of those efforts helped the streamer achieve record profit, gross margin, and free cash flow in the quarter, boosting shares by double digits in early trading.

The company did disappoint on monthly active user metrics, although management cited "a number of levers to pull over the upcoming quarters" to improve user acquisition, such as more targeted marketing efforts and free product enhancements.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance