Apple Inc. (AAPL) Apple Music Just Can’t Catch Spotify

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Apple Inc.’s (NASDAQ:AAPL) Apple Music is a success by all counts, but one target still remains elusive.

Apple Inc. (AAPL) Apple Music Just Can’t Catch SpotifyDespite impressive subscriber gains since its 2015 launch, AAPL’s streaming music service has been unable to catch primary rival Spotify. And in the latest sign that the competition is far from over, Spotify just announced it has hit the 50 million paid subscriber mark.

Spotify Hits 50 Million Paid Subscribers

Apple Music and Spotify are considered to be the two big players in the streaming music war.

Spotify launched in 2008, giving it a long lead in which to build up steam over Apple Music, which didn’t go live until 2015. Despite that head start — and predictions that after its initial free three-month trial expired, Apple’s streaming music service would see a big drop off of subscribers — Apple Music quickly began to gain obliterate Spotify’s numbers.

Apple Music hit 10 million paid subscribers after just six months, a milestone that took Spotify nearly six years to reach. Since then, Apple Music has continued to add paid subscribers at a rapid pace: 11 million by last February, 13 million in April, 17 million in September and 20 million in December.

However, despite the rapidly increasing popularity of Apple’s streaming music service, Spotify stubbornly refuses to go away. In fact, rather than stalling or beginning to slip as many expected, Spotify’s numbers have also been growing strongly.

Spotify had roughly 20 million paid subscribers at the time Apple Music launched. This week, the company announced it has hit 50 million.

In other words, Spotify is not going anywhere any time soon.

A Little More Competition

While the big streaming music battle has been between Apple Music and Spotify, many other competitors are duking it out for the dollars of music fans. And rather than scare off new entrants, the success of Apple Music led to a big new competitor taking a shot at the business.

Amazon.com, Inc. (NASDAQ:AMZN) launched Amazon Music Unlimited last fall, matching Apple Music’s basic subscription rates. But Amazon added a twist by discounting the service for Amazon Prime members and slashing it it less than half the regular $9.99 monthly fee for owners of its Amazon Echo smart speaker.

Will Apple Music Ever Catch Spotify? (And Does It Need to?)

The success of Apple Music isn’t just about bragging rights.

The streaming music service is part of Apple’s Services division. That division is increasingly important to the bottom line. It provides recurring revenue, which helps to protect against shocks when hardware sales hit rough patches. In AAPL’s most recent quarter, Services posted the strongest year-over-year growth of any of Apple’s divisions.

2016 revenue numbers for Spotify aren’t yet available, but the music streaming service has consistently lost money, including $176.9 million in 2014 and $188.7 million. The situation looked grim a year ago, with Apple Music growing rapidly. However, big increases in paid subscriber drove a revenue gain of 80% to $2.12 billion. That marked a turning point in the outlook for Spotify’s survival.

With profitability a distinct possibility in 2017, Spotify could be in acquisition territory. Alphabet Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) have both been floated as potential buyers. An initial public offering could also be in its future.

Regardless, Apple Music seems unlikely to knock Spotify off the top of the streaming music charts, at least not in the near future.

That doesn’t mean Apple Music isn’t a success. It quickly vaulted from zero to a contender for top spot in mere months and has continued to grow. As shown by the number of streaming music services that continue to attract paid subscribers, there is still plenty of room for multiple big players to make money.

Apple Music will continue to drive revenue into AAPL’s Services division, even if that coveted No. 1 spot remains elusive.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/apple-inc-aapl-apple-music-just-cant-catch-spotify/.

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