apple-music

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 split between individual and family subscriptions, 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 50/50 and that the costlier countries like those in Europe cancel out the cheaper ones like India, then a monthly subscription of $12.50 times 6.5M customers gives us $81M a month. Multiply that by 12 months, and we can say that Apple Music is likely to be bringing in somewhere around a billion dollars a year … 

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.

So at best, music downloads are worth $10B a year. Already, streaming music is worth 10% of that.

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.

Spotify took almost four years to hit 4M paid subscribers; Apple comfortably beat that in as many months.

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.

Apple is going to end up with way more than 6.5M customers in the course of the next month or two.

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.

Photos (top to bottom): Apple; Andrew Matthews/PA

Filed under: AAPL Company, Apple Music Tagged: Apple, Apple Music, iTunes, Music, streaming, subscriptions, Tim Cook

Continue reading more about AAPL Company, Apple, and iTunes at 9to5Mac.

What do you think? Discuss “Opinion: As a $1B business, Apple Music appears to be off to an impressive start” with our community.