Welcome Back to Built to Last

Hey there! Hope you had a great weekend and you’re easing into the week with some energy. Thanks for carving out a few minutes to dive in with me. Every week we unpack how enduring companies adapt (or don’t), and what we can steal for our own playbooks. This week we’re looking at Spotify, why it’s raising prices again, how it got here, and the strategy behind turning product innovation into sustainable margin.

Spotify’s latest move is simple to describe and hard to execute: raise prices while growing faster. After years of keeping Premium costs flat in many markets, the company is now leaning on measured price increases paired with new features to accelerate profitability without stalling its march toward one billion users. That balance matters: in two-sided platforms, push too hard on price and you trigger churn; invest too slowly in product and you lose engagement to rivals. Spotify says it can do both: add value and charge a bit more, country by country, while keeping users happy enough to stick around. Under the hood, the company is also tightening costs and focusing on the products that keep people in the app longer. The bet is that features → engagement → pricing power becomes a durable flywheel rather than a one-off boost. If they’re right, this could be a masterclass in monetizing scale without breaking consumer trust.

Founding / Background

Spotify began in Stockholm in 2006, co-founded by Daniel Ek and Martin Lorentzon, with a stark premise: build a legal, delightful alternative to piracy that’s fast, searchable, and ubiquitous. The timing and context mattered. In the mid-2000s, the industry was still reeling from Napster and BitTorrent; iTunes had taught consumers to pay for files, but the future was clearly about access, not ownership. Spotify’s freemium model, an ad-supported free tier feeding conversions into Premium was designed to align incentives across listeners, labels, and artists by making legal listening the path of least resistance.

From there, growth followed a familiar European-to-U.S. arc: careful licensing market by market, product polish (playlists, discovery tools, and social sharing), and relentless distribution across devices. The company’s coming-of-age moment arrived in 2018 with a direct listing on the NYSE, an unusually transparent route to public markets that fit Spotify’s tech-meets-media DNA. As competition intensified, Apple bundled music, Amazon folded music into Prime, and YouTube leaned on video Spotify pushed harder on differentiation: better discovery, deeper personalization, and, crucially, expanding beyond music into podcasts, audiobooks, and creator tools. These bets were not costless. The company spent heavily on content and new formats, then shifted toward discipline trimming headcount, curbing podcast overspend, and tightening marketing, moves that ultimately set up its first annual profit and gave management cover to talk about price increases from a position of strength.

A throughline in Spotify’s history is the conviction that software can change the unit economics of culture. Personalized recommendations (Release Radar, Discover Weekly), low-friction sharing, and near-instant playlist creation turned passive listening into an interactive habit. That habit became the moat: when your daily soundtrack is tuned to your tastes and portable across phones, cars, smart speakers, you’re less likely to churn when prices nudge up, provided the product keeps getting better. It’s that logic Spotify is leaning on today.

Current News

In August, Spotify signaled another wave of price increases lifting the Premium individual plan from €10.99 to €11.99 in multiple regions across South Asia, the Middle East, Africa, Europe, Latin America, and Asia-Pacific, beginning in September. Management framed pricing as part of a “regular business toolbox,” not a one-time fix: a lever they can pull when product value justifies it and when market conditions allow. The decision follows a period in which raising prices, cutting costs, and improving product mix helped Spotify notch its first full-year profit. Importantly, this is not a retreat into harvesting mode; it’s a claim that the platform can add value and capture value at the same time.

On the growth side, the numbers remain strong. As of Q2 2025, Premium subscribers climbed to ~276 million (up ~12% year-over-year), while monthly active users reached roughly 696 million (up ~11% YoY). Revenue grew, margins improved, and the company reiterated its ambition to push toward one billion users, a moonshot that requires both smart pricing and relentless feature velocity. Markets noticed: while quarterly guidance can wobble (higher payroll taxes recently weighed on profit forecasts and shook the stock), the multi-year arc points to a platform getting healthier as it scales.

Features are doing more of the narrative work. Spotify has been expanding their AI Playlist. A generative tool that lets users describe the vibe they want and refine it with natural-language prompts into dozens of markets, including the U.S. It’s also upgrading DJ-like transitions in playlists and piloting more advanced “Mix” capabilities that make listening feel continuous and curated, not a sequence of disconnected tracks. Layer in audiobooks, improved podcast tooling, and the potential for “superfan” subscriptions with exclusive perks, and you have a product story designed to support a pricing story: richer experiences earn permission to charge a little more.

There’s also the ecosystem narrative. In March, Spotify said it paid $10 billion in royalties in 2024, its largest annual payout to the music industry. That kind of headline matters with labels and artists; it signals that Spotify sees itself as the economic engine of digital music, not just a tollbooth. If the company can keep expanding the pie. More users, more time spent, more ways to pay then modest price steps look less like extraction and more like reinvestment into the platform’s network effects. The tricky part is sequencing: raise too fast without obvious feature wins and you dent goodwill; raise thoughtfully, while showcasing new value, and you strengthen the social contract that underpins subscriptions.

So What’s The Big Idea From This?

Let’s Look At What Spotify Did Differently.

Spotify is turning feature velocity into pricing power. Rather than treating price as a blunt instrument, it invests into the reasons a customer won’t churn when prices rise: personalization that feels magical, seamless listening that feels premium, and adjacent formats (podcasts, audiobooks, DJ-style mixing) that expand the perceived scope of the service. In practical terms, this is a deliberate choreography. First, improve product quality and breadth in ways users can feel. Continuous mixes for the gym; faster, smarter playlists for a late-night focus session; a new audiobook included in Premium that replaces an extra purchase. Second, run a disciplined business: pare back spend that doesn’t compound, consolidate tooling, and ensure each new feature increases time-in-app. Only then introduce measured price steps in markets where elasticity looks favorable. The company’s willingness to talk openly about future price rises framed as part of a “toolbox” signals confidence that the perceived value is rising at least as fast as the nominal fee.

Why What They’re Doing Works (and When It Doesn’t)

This playbook works because platforms monetize from habit. If a service is woven into daily routines, morning commute, workout, cooking, deep work then small price changes are judged against the pain of switching and the joy of staying. Spotify’s moat isn’t exclusivity; it’s the compounding of tiny conveniences that make listening feel bespoke. That’s also why the company keeps shipping AI-driven features and exploring “superfan” tiers: deepen engagement for the many while unlocking more willingness-to-pay for the few. But execution risk is real. Rivals are formidable, macro headwinds can crimp consumer tolerance, and mis-sequenced price moves can backfire. The safeguard is the same principle that built Spotify: earn permission before you exercise pricing. For founders, that’s the difference between a price hike and a value exchange.

Key Takeaway

If you run a subscription or recurring-revenue business, don’t think of price as a lever you pull just because you can. Treat it as a lever you earn because of product. Make a short list of features that meaningfully increase daily use, then ship them so customers feel the upgrade before you ask for more. Build a habit, then monetize the habit. And when you do raise prices, narrate the change. Tell users what you improved and why it’s worth it.

Feedback & CTA

What do you think? does Spotify have the sequencing right, or are we near the limit of what listeners will tolerate? If you’ve raised prices in your own business, what did you do to earn permission first? Hit reply and share your experience; I’d love to include a few reader stories next week.

Speaking of Spotify, we’re also thinking about extending Built to Last beyond the inbox. We’re thinking of starting a weekly podcast on Spotify where we talk through these stories, explore lessons in real-time, and maybe even bring on founders and operators to share their perspectives. It’s something we’re exploring, but your feedback matters most. What would you want to hear from us if we launched?

We look forward to getting back to you with the results in next weeks edition, until next time!

— The Built To Last Team

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