Apple Music From Apple Inc. (AAPL) Accidentally Helps Fuel Spotify Growth Spurt

Apple Inc (NASDAQ:AAPL) iPhone

When Apple Inc. launched Apple Music, they didn’t expect this to happen. It seems that Apple’s streaming music service has helped Spotify net in more customers than would have been possible before. According to a Spotify exec, the service now has nearly 100 million users spread across 59 markets. This feat comes with a backdrop of zero profit and growing competition. The Stockholm-based firm was established 10 years ago.

Apple Inc (NASDAQ:AAPL) Apple Music

In the words of Jonathan Forster, Spotify’s VP, the entry of Apple has been a boon to the firm. This is due to the fact that its high profile has raised the awareness of streaming. Building an “industry on your own” is tough, he added.

Spotify Has a 30m Paid Subscriber Base in 59 Countries

Spotify now boasts a paid subscriber base of 30 million users, the most of any streaming firm. Apple Music, which can be used in at least 100 countries, has about 13 million paying subscribers.

Apple isn’t the only firm trying to edge out Spotify from the market. Other in the game include German firm SoundCloud, Pandora Media Inc and Tidal, which is owned by Jay Z. Alphabet Inc’s Google is also in the market through Google Play Music and YouTube.

Forster thinks the market can’t sustain in the long run if too many players join the industry. A better scenario would be if the small players build niche markets for themselves. For example, one firm could provide classical music streaming service.

Ready to Go on an Expansion Spree..

The company is raring to expand, having raised in March about $1bn in convertible debt from Dragoneer Investment Group and TPG Capital.

The music streaming service sees its revenues mostly coming from subscriptions. However, it will build other sources of incomes such as video, concerts and merchandising. However, in Forster’s own words, the company isn’t aping Netflix.

The music streaming service revealed that the conversion rate for shifting new users who rely on its ad-based service into paid subscriber has remained constant at 25 to 30 percent. This figure still stands despite the growth in user numbers.

Forster hinted that the company is open to acquisition by a larger technology firm such as Facebook Inc or Google, albeit reluctantly. This is mainly due to the desire to retain its culture and identity.

Spotify introduced a new video product that will have exclusive content such as brief, behind-the-scenes videos of musicians. The video program includes 12 original shows that concentrate on pop and music culture. Each episode is scheduled to last under 15 minutes. The service will be available to Android and iOS users (with both paid and free subscriptions) in Sweden, the U.S., Germany and the U.K. The company will later diversify into animation, comedy and collaborations with popular artistes.

Apple Music Bets on Exclusive Distribution Agreements to Grow

Apple Music is also partnering with will.i.am and Dr. Dre as well as Vice Media to develop new programs for its service. Its strategy of getting artists to exclusively distribute their music via its site is apparently paying off. Hip-hop artist Drake is reported to have sold at least one million copies of his latest album “Views”. This milestone was attained in less than five days after it was made available on Apple Music and iTunes store.

Drake sold 632,000 copies of his album in less than 24 hours, a rare feat considering sales of CDs and downloads are slowly declining.

Apple is considering upgrading its music streaming platform. When it was launched in June 2015 amid lots of fanfare, subscribers were given three months free access. Within a short time, 11 million users registered to try the service for free. However, 48 percent of those subscribers cancelled their subscriptions before the $10 monthly fee came into effect.

Most users cited the site’s confusing interface as the reason why they bolted out. Consequently, Apple is rumored to be working on revamping the site to make it more intuitive to use.

Apple’s CEO Tim Cook is focusing on services such as Apple Music and Apple Pay to boost revenues amid stock plunge due to falling iPhone sales.

Most analysts believe Apple’s risks wasting a great opportunity by failing to develop solid Internet-based apps that could be sold with its iconic hardware. Services such as Maps, Siri, iCloud and Photos have constantly been berated for failing to measure up against the competition.

Offers Students a Discounted Rate

Apple Music has also cut down the monthly subscription fee for students in the U.S. Those currently studying will now access the streaming platform at a rate of $4.99 er month. This will ensure that music lovers who are still in school can access similar features as those who have paid the full subscription fee.

As for Spotify, the firm seems to be keen on buying firms whose scale is like that of its recent acquisitions. The main goal of the buyouts was to bring onboard new tech and teams. This means the firm will continue to invest in businesses that are relevant or whose operations resemble its own business

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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