Spotify (SPOT) shares are trading higher after the company announced plans to raise prices in five different regions, according to a Bloomberg report. The music streamer seeks to improve margins and achieve profitability via subscription cost hikes as it expands into segments such as podcasts and audiobooks.

Yahoo Finance's Entertainment Reporter Alexandra Canal breaks down the details.

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Editor's note: This article was written by Angel Smith

Video Transcript

BRAD SMITH: Shares of Spotify popping, as Lil Mama would say, on news that it's raising prices in several key markets for a second time in a year. That's according to a Bloomberg report.

Joining me now on this, our very own Alexandra Canal. Hey, Allie, what do we know?

ALEXANDRA CANAL: Yeah. So according to this Bloomberg report, Spotify is going to increase prices by about $1 to $2 in five different territories. That includes regions in the UK, Australia, and Pakistan.

And then for US subscribers, they're going to see price hikes later this year. I did reach out to Spotify for confirmation on this report. They declined to comment, saying, they had no news to share at this time.

But Spotify is one company that's consistently faced pressure to raise prices. They are the leader in audio. They have a lot of price elasticity. Wall Street pretty much believes that they have the pricing power to continue raising the cost of those subscriptions, especially, since we consistently see growth in those monthly active users and premium subscribers.

We did see Spotify raise prices toward the end of last year by $1 to $2 in the US, depending on the plan. At the time, Spotify CEO Daniel Ek said that the ability to raise prices was just another tool kit in the company's push to really improve their margins.

And that's something that Wall Street analysts have said, that if you raise prices, you're going to improve those margins and, eventually, reach profitability. Spotify has-- they poured a lot of money into their podcast business. And, now, they're pouring a lot of money to the audiobooks business.

So according to this report from Bloomberg, the price increase is going to help alleviate some of those cost pressures, as they continue to expand their audiobook arm of the business. But that just means we're going to have to pay more, which is not great.

BRAD SMITH: Yeah. It's going to impact some people's wealth out there. You think about how much people buy into the subscription economy.

ALEXANDRA CANAL: Across the board.

BRAD SMITH: Whether rising prices will actually moderate the number of subscriptions that people are willing to have. Has this caused a dent in that thinking to this point?

ALEXANDRA CANAL: Well, that's sometimes why when we hear about price increases, we see stock prices actually fall, because there is concern that that's going to impact the amount of subscribers.

Now, we're seeing the stock rise more than 5%. So I think, largely, investors are shrugging off that. Again, we consistently do see the company add premium monthly active users. They have new features that they're consistently rolling out. So they're pretty much testing the bar to see how far they can go to raise prices before we start to see a pullback in those numbers, because quarter after quarter, they usually beat those Wall Street consensus estimates.

If we see that reverse, I think, they'll probably take a closer look in how much they can actually raise prices. So it's up to the consumer to really not sign up or not pay for these services.

BRAD SMITH: Yeah. Consumers that are trying to manage expenses here. So we'll certainly see how this impacts Spotify stock, as well as, you the subscriber, out there.

Allie, thanks so much.

ALEXANDRA CANAL: Thank you.