The big question mark over Apple Music has been how many customers would choose to try it out, and – crucially – how many of them would be willing to pay for the service once the free trial ended. Tim Cook answered both questions yesterday, revealing that the service currently has 15M subscribers, of whom 6.5M are paying customers.
There are still plenty of unknowns, of course. We don’t know the exact split between individual and family subscriptions (though family subs were around 18% back in August), and we don’t know how subscribers map out across the countries – both of which we’d need to know to accurately calculate how much Apple is earning from the service.
But if we do a back-of-an-envelope guesstimate and say that the split between solo and family accounts is around 80/20 and that the costlier countries like those in Europe cancel out the cheaper ones like India, then an average monthly subscription of $11 times 6.5M customers gives us $72M a month. Multiply that by 12 months, and we can get $858M Apple Music revenue per year. Given that this is all very rough and ready, let’s call it a billion dollars a year in round numbers …
That’s a small business in Apple terms, of course. But not a totally insignificant one. Again, let’s do some approximations …
Apple unfortunately doesn’t disclose its revenue from music sales – it tucks that number away inside the $20B a year business called ‘Services,’ which includes all other iTunes sales (apps, movies, etc) as well as Apple Pay, AppleCare and a bunch of other miscellany.
But I very much doubt that music downloads amount for more than half of that revenue – and probably substantially less. So at best, music downloads are worth $10B a year. Already, streaming music is worth 10% of that. That’s a very impressive start.
And it is just the start. The relative trajectories – music downloads falling while streaming music grows – has been a visible trend for years now. Billboard suggested a couple of years ago that 2012 may have been ‘peak iTunes‘ – a theory supported by later numbers.
Apple Music will of course be significantly accelerating that trend. I know that I haven’t bought a single track since I signed up to Apple Music – I’ve merely used the ‘Add to my music’ option to add streamed albums and playlists to my music library without purchasing it. I’m sure I’m not alone in that. So that ~$10B will be falling even as I write.
It doesn’t take too much imagination to see a point – some years down the road – when Apple Music subscriptions will exceed revenue from iTunes downloads.
Ok, so Apple Music is doing well at a time when streaming music is taking off, but how well is Apple doing against the competition? Again, I suggest the answer is: rather well.
Let’s compare Apple Music to the streaming music market leader, Spotify. Sure, Spotify currently has over 20M paid subscribers – three times as many as Apple – but it’s taken the company seven years to get there.
Spotify took almost four years to hit 4M paid subscribers; Apple comfortably beat that in as many months.
We do, of course, need to throw in a few provisos. Apple has, after all, taken just a single monthly payment so far, and I’m already extrapolating that to full-year revenues.
The biggest unknown is how many free trialists simply forgot to cancel their subscription before Apple started charging them. Personally, I’m organized about these things. Any time I sign up to a free trial, I immediately add a note to Calendar a few days before the first payment is due. That alerts me to make a decision so that I have time to cancel if I don’t want to pay. But not everyone is that organized: there will undoubtedly be a bunch of people who saw that first payment leave their account, muttered something under their breath and then cancelled.
But this has been a high-profile launch, with a well-advertised three-month trial. I think the vast majority of people will have decided long before the trial ended whether or not it was worthwhile.
I wasn’t an easy convert for Apple. I have a relatively large library of my own music, and I was happy with Spotify. My first impressions of Apple Music weren’t great – though they had improved somewhat within the first week of use. But by the time I needed to make a decision, I was sold.
From our poll at that time, I was far from alone: more than half of you, some 58%, had decided to hand over the cash.
And remember that there is one crucial difference between Apple Music and Spotify: with Apple Music, you don’t have the option of remaining a free subscriber for longer than three months. So the 8.5M people who are still trialling Apple Music have yet to reach the deadline. Given that all the evidence so far is that a significant chunk of trialists opt to stay on as paid subscribers, Apple is going to end up with way more than 6.5M customers in the course of the next month or two.
Cook said yesterday that he was “really happy about it, and I think the runway here is really good.” It’s hard to disagree with that assessment.
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It happen the other way to me. I loved Apple Music at the beginning and even accepted one month paid to stay at it… but after awhile I just got tired of it and went back to Spotify. I found that the only thing was really a deal breaker for me was Beasts1 which I believe I can listen for free.
The social part of Spotify was always very important to me… I follow brands, friends and they all share interesting tracklists and songs and even can see what they are listening to in the desktop app. In this Apple Music doesn’t delivery anything close to that as the Connect feature is just merely a board for artists, but you can’t do much out from there.
Other issue to me was pricing. I’m based in Panama and Spotify doesn’t have the same price strategy for every market. In Panama I pay 6.99 for a single user and 8.99 for two as part of the family plan. Setting up the family plan for Apple Music was a pain and way more expensive from what I get from Spotify. I’m an Apple user and been for years and I had well configured the family features at iCloud and even that way couldn’t add my wife in properly into Apple Music… and in this matter the support was really awful.
Eventually got tired and came back to Spotify which has been always there and got tons of playlist I made myself over the years.
for me, it was the fact that it was glitchy AF and no support for Android.
You realize Apple Music IS soon coming to Android?
I really like Apple Music. I’ve always hated Spotify and its recommendations…
Do we know though if the 6.5 million paying customers include family plan members? So I pay $15 for a family plan and have 5 users on my account. So that breaks down to $3/user. Do I count as one paying customer in Apple’s numbers or does my family count as 5 in that 6.5 million?
It’s subscriptions.
They count all users, single and family plan members in these numbers.
Hmmmm, great insights, though I think Apple Music coming to Android is worth a mention. If it comes with a similar trial, I can see it expanding their user footprint quite a bit.
Yes, indeed
Like Ben, I have a massive iTunes library as well, encompassing music I’ve collected for a decade, with over 90% of them being CD rips in AIFF format and even some in hi-res formats, and there’s absolutely no way I’m gonna let go of those and start a third-party streaming service. I’d so much choose listening to my library and continue buying CDs over using spotify and re-adding thousands and thousands of already-favorites into the new streaming service library (I’ve been so happy using iTunes match). In this regard, Apple Music’s seamless integration into my library makes it a no-brainer to use it other than anything else. I know I’m not alone here.
You can’t even compare the fact that it took Spotify 4 years. When Spotify came out, music streaming wasn’t really a huge thing yet, whereas now it is. It’s much easier now for a company like Apple to come in and get so many users quickly, because Spotify has already paved the road for it.
Indeed.
Exactly. If it hadn’t been for Spotify’s success, Apple might not even have acquired Beats in the first place.
Ben’s articles are always the best on this site. They are well thought out, well researched, and well written.
Thanks for the kind comments, Grayson.
INTJ by the way.
You can’t compare Spotifys early numbers to Apples….Spotify created the arena Apple is now getting to play in. 7 years ago spotify style streaming was brand new, on slow networks of course it was a slow go, it was an entire paradigm shift in music consumption that people needed to be eased into.
No, Spotify didn’t create anything.
The first streaming service was Rhapsody, 8 years earlier than Spotify.
I think payed Apple Music subscribers will settle at around the 10 to 12 million mark in the end. Which is good for a music streaming service, especially one this new. I’d imagine when the release of iOS 9.1 becomes official, most of the interface bugs will get sorted. And the 10 to 12 million or so paying subscribers will provide Apple with enough incentive to continue improving it, instead of letting it flounder like it did to other initiatives like Newsstand for instance.
I think it’ll be a lot higher than that. They’re at 6.5 million now and have 8.5 million users yet to transition off a free trial, and the Android version hasn’t shipped yet either. If they play their cards right there’s no reason they can’t catch Spotify given Apple owns their platform.
I think it’d be highly disappointing for Apple to hit 6.5 million subscribers in three weeks of paid membership kicking in to then struggle to go past 10 to 12 million subscribers over time.
To be honest i have dropped Apple Music and Spotify and been on Tidal ever since, lets say your not into FLAC sound quality alone, the content is amazing!! 96 concerts streamed on Tidal, Boxing events etc all airplay’d on my TV..to be honest none of these services have the content editorials and videographers that Tidal has. I was a hater at first but then im like wait for 9.99 my friends watching live concerts? Boxing matches? Exclusive music you cannot get on any other streaming service and i DONT have to torrent anymore…Tried all three i suggest everyone do themselves a favor and try Tidals new services post update. Thank me later if your into content especially indie content and check out the discovery and rising tabs, trumps anything both Spotify and AM have…Im a Apple head i wanted to like AM but its not quite there content wise, and Spotify isn’t doing what Tidal is doing with concerns and exclusive music and editorials and videographies…Tidal seems like a music heads dream the rest are just streaming the 30mil catalogue of music.
Nice wordpress account Jay Z ;)
You might have a point. I’ve heard great things about Tidal. Its the favourite streaming service for many audiophiles too, due to the CD quality FLAC lossless tier. But even if you don’t go for the pricier CD quality option, I think its the only other streaming service that uses AAC like Apple, only at a higher bitrate of 320kbps to Apple’s 256kbps. Also from a sound quality point of view there were rumours that they were going to release an even higher quality 24bit audio tier. But that was before Jay-Z and co purchased the service. So that might be kiboshed for now. But also like you the reviewers praised its content quality too.
Lots of negative opinions, all meaningless. Just like troubleshooting forums we only hear from the disgruntled or trolling crowd. Apple Music is just getting started and we haven’t even gotten to the Android support that’s coming. Then there’s Apple legendary marketing prowess, the new Apple TV that will support Apple Music, and the fact that important artists are friendly toward it.
The really interesting part will be Spotify’s next financial report. How many of those 6.5 million paying Apple Music subscribers switched from Spotify? It’s kind of fun reading the naysayers coming up with reasons Apple Music is a failure after three months. The convoluted logic is interesting. to say the least.
Without underestimating Apple, if it took 4 years for Spotify to get 4 million paid subscribers we should recognise that Spotify wasn’t launched in as many countries, streaming wasn’t as popular as today and they didn’t have the financial nor the marketing muscle that Apple has.
Yes, indeed: Spotify was a pioneer, and Apple is riding the trend it in large part created. At the same time, there’s no denying the level of success Apple has achieved right off the bat.
There are always pioneers before Apple. But Apple finds away to do it better, inspiring lust in its customers like no other company.
iTunes Music Downloads are worth $3 Billion a year, not $10 Billion. The ENTIRE GLOBAL MUSIC INDUSTRY is worth a total of $15 BILLION a year in revenue. So iTunes Music plus Apple Music adds up to $4 BILLION = 26% of total Global Music Sales! And it is growing!
Can you point me to the sources for your figures, James? Thanks!
I’m one of the 6.5m, and I’m happy with it.
Feels like you really massaged the numbers, and estimate to get it close to 1 Billion, just for the head line.
No massaging – my estimates are right there, and are based on the best available data I can find. Given the approximations involved, a billion in round numbers seems perfectly appropriate as the headline number.
I liked Apple music because of its integration with siri which is something no one else can tap into currently. That alone is the killer feature for me. The problem though is that I am not the type that wants to pay $10 a month for music (or however much they charge here in Canada). I might pay $5 a month if that was an option but unfortunately it isn’t. I asked siri to play some aerosmith one day only to find out they weren’t on there, so I asked for the Beetles and they weren’t on there either, seems like they need to get some more content deals worked out. I can listen to aerosmith just fine and for free on my slacker radio (although not on demand and mixed with other songs so not nearly as convenient)