Estimating the Demand for Spotify Premium Plans: Evidence from Pricing and Plan Characteristics in India

Abstract

This paper investigates consumer demand for Spotify’s premium subscription plans in India, focusing on how price and plan features influence user choice. Using a discrete choice framework and individual-level survey data, this paper estimates a conditional logit model to quantify the roles of price and account-sharing attributes (e.g., Duo and Family plans) in shaping subscription decisions. To address potential price endogeneity—where firms set prices in response to unobserved demand—this study employs an instrumental variable approach using Spotify’s premium plan prices in other geographic markets (U.S. and Brazil). The results reveal substantial price sensitivity: after instrumenting, the estimated effect of price becomes more negative, suggesting that uncorrected models understate true demand elasticity. While the estimated impact of features such as the ability to share plans with one or more additional users is economically meaningful, statistical significance is limited—likely due to the constrained variation in available plan choices. The study contributes to the growing literature on digital subscription platforms and provides a flexible empirical framework for future research in emerging markets and multi-tier pricing environments.