Apple Inc. (NASDAQ:AAPL) had a lot to say during a WWDC 2017 keynote that went for nearly two-and-a-half hours.
Buried beneath all the new Mac releases, upgrades to the various Apple operating systems and the new HomePod smart speaker was some pretty big news about Apple Music.
The company noted that its streaming music service — which was first announced at WWDC 2015 — has hit 27 million paid subscribers.
Apple Music Subscribers Growing at Rapid Pace
Apple Music was first announced at WWDC 2015. It went live on June 30, 2015. That means the number of Apple Music subscribers has gone from zero to 27 million in less than two years. In comparison, Spotify — the leading streaming music system — took over seven years to hit that same mark.
Spotify announced that it had hit 50 million paying users in March, so it continues to hold the number one spot. But Apple Music growth is happening at a faster pace, and Apple is catching up. In March 2016, Spotify hit the 30 million mark, while there were roughly 11 million Apple Music subscribers, or about one third the number. Just over a year later, and while both services continue rapidly signing up users, Apple Music growth is fast enough that it’s now at half of Spotify’s paid user base.
And at this point, with 40 million songs in its streaming library, Apple Music tops the 30 million offered by Spotify.
There are still plenty of other competitors in the streaming music market. Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Play Music has now been around for five years; Amazon.com, Inc. (NASDAQ:AMZN) launched Amazon Music Unlimited last year and there are smaller independent services like Deezer and Tidal. Between them, Apple Music subscribers and Spotify subscribers make up 64% of the entire global paid music streaming market.
Apple Music Growth Boosting Services Revenue
The impressive Apple Music growth means a lot more than bragging rights for Apple. Every paid subscriber means another $9.99 monthly fee collected by Apple. Those 7 million new Apple Music subscribers added since December represent an additional $210 million per quarter in revenue. Even at $4,999 a pop, Apple would have to move a lot of those new iMac Pro computers it announced at WWDC in order to equal that added revenue — over 42,000 of them in a quarter, to be exact.
Apple’s Services division is becoming increasingly important to the company. It’s made up largely of recurring revenue that’s less susceptible to fluctuations based on consumer hardware buying cycles, its growth has been leading other divisions lately, and those 27 million Apple Music subscribers represent a big chunk of it.
Can Apple Music Revenue Continue Growing?
The rapid pace of Apple Music growth can’t continue forever, of course. At some point, everyone who’s willing to pay for streaming music will be signed up. After that, meaningful growth will mean convincing people to jump from Spotify or other services.
To help prepare for that eventuality, Apple has been working at boosting Apple Music’s appeal. The service has seen re-designs to make it easier to use, family plans and discounted yearly membership gift cards.
Apple Music is also introducing exclusive video series for its members, including Carpool Karaoke: The Series, which launches in August and Planet of the Apps, which has just premiered. The new HomePod smart speaker is also designed to leverage Apple Music and the company is more closely integrating Apple Music playlists with its Apple Watch.
With Spotify at 50 million, Apple Music clearly still has room to get bigger. That’s good news for the company’s increasingly important Services division, and there’s also a “halo” effect. The more popular Apple Music gets, the more likely Apple is to sell hardware that’s designed to make the most of its streaming music service.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
