Spotify and Beats Are Locked in a Price War

It’s not just Dr. Dre and Jimmy Iovine who will be getting richer because of Apple’s $3 billion purchase of Beats Electronics — music fans might start saving some scratch, too. Beats and Spotify have both recently slashed the prices of their music streaming services, a sign that the long-standard going rate of $9.99 per month may be falling.

Beats fired the first salvo last Wednesday, dropping the annual subscription price of its service from $199.88 to $99.99 (monthly subscribers don’t qualify for the discount). Spotify fired back today with a limited-time offer of a three-month premium subscription package for just $9.99.

The price drops may indicate that streaming services will have to find a new monetary sweet spot to truly reach a mass audience. An analysis by Re/Code recently found that the average music fan spends between $48 and $64 per year on music, considerably less than the $100 and $120 that Beats and Spotify ask for, respectively. Spotify’s deal only runs through June 15, but the company could face growing pressure to permanently match Beats’ price. Though Spotify is the clear leader in the field with 10 million paying subscribers, Beats will benefit from tighter integration into Apple’s products and access to the tech giant’s endlessly deep pockets. The company also has its own high-margin profits from its billion-dollar premium headphone business.

Spotify, by contrast, is a money-losing venture that is essentially trying to grow its way to profitability. Slashing prices will make that goal harder, but with Apple more active in the streaming space and Google prepping a music-focused version of YouTube, charging $9.99 per month may not be an option much longer.