Apple Music Dominates Spotify in U.S. … What’s Next?

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Apple Music - Apple Music Dominates Spotify in U.S. … What’s Next?

Source: Apple

Streaming music is big business and it has become especially important for Apple (NASDAQ:AAPL). Since the launch of Apple Music, the company has been battling it out with Spotify (NYSE:SPOT) for the number one position in paid subscribers. Apple Music and its $9.99-per-month subscription contributes revenue to its Services division that’s not tied to cyclical hardware sales — something that becomes increasingly important for AAPL stock as iPhone sales slow.

At the same time, the popular streaming music platform makes the Apple ecosystem more attractive, helping to boost sales of iPhones, HomePods, AirPods and Beats headphones.

So it’s big news that three years after its launch, Apple Music has reportedly overtaken Spotify for paid subscribers in the U.S. market.

Apple Music Paid Subscriptions Overtake Spotify

Apple and Spotify have been battling it out in AAPL’s home turf since Apple Music launched on June 30, 2015. Spotify had a considerable head start, starting up in 2008 and officially launching in the U.S. as a paid streaming music service in 2011.

Since that time, the streaming music battle has turned into a two-way battle, with Spotify holding onto a substantial lead over second place Apple Music. And despite the impressive ramp up of Apple Music and its ability to convert free trials into paid subscribers, Spotify has continued to maintain a significant lead. As of May, Spotify had 75 million paying subscribers, while Apple Music hit the 40 million mark in April.

But there was big news to kick off last weekend, and it’s a win for anyone who invests in AAPL stock. Digital Music News reported that a major music distributor — which chose to remain anonymous — revealed that for the first time, Apple Music has overtaken Spotify in the U.S. market. Both reportedly have over 20 million paying U.S. customers, but AAPL has a slight lead.

This moment has been predicted since early this year, when The New York Times reported that Apple Music was growing its paid subscriber base in the U.S. at a rate of 5% monthly, while Spotify was at 2%. With that growth rate, the narrow lead AAPL currently holds is likely to continue to grow, and that’s good news for Apple stock.

Why Apple Music Growth Is Good for AAPL Stock

AAPL stock has seen phenomenal growth since the launch of the iPhone. Sales of iPhone are on the verge of making Apple a trillion dollar company. But the days of quarter-after-quarter record smashing sales are over, as the market matures and smartphone sales level out. In fact, we ended 2017 with the first recorded quarterly decline in world smartphone shipments.

Apple Music represents recurring revenue that doesn’t fluctuate with release cycles the way hardware sales do. New iPhones or iPads see big sales at launch that trail off and then drop when consumers begin holding off buying in anticipation of a new release. At a certain point, the hardware is good enough they stop upgrading every two years and hold onto their devices for longer, further slowing sales. Apple Music subscribers just keep paying their $9.99-per-month, contributing to that increasingly important Services division revenue — the second largest AAPL division.

And while Apple Music is not reliant on hardware sales (you can subscribe and listen on an Android device if you like), it can help to boost AAPL’s hardware sales. The more successful Apple Music is, the more likely it is that someone will buy a product built around it — like the HomePod smart speaker — or another product with the Apple logo, like an iPhone, or Apple TV.

That’s why there is excitement over Apple Music overtaking Spotify in the U.S. market. Yes, Spotify still holds a big lead in the global market. But Apple Music is catching up, and continued growth of its streaming music service is nothing but good news for AAPL stock.

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


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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/2018/07/apple-music-dominates-spotify-in-u-s-whats-next/.

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