Apple applauded for closing Spotify gap – video remains real prize

Shock and awe filled news reports in the wake of research claiming Apple Music will relieve Spotify of its crown in the US as soon as this summer as it currently passes 36 million customers globally. Should we really be so surprised that Apple’s dominant market position has resulted in music streaming success? At Faultline Online Reporter, our praise will be saved for the day Apple mirrors this achievement by becoming a notable force in OTT video.

For that to happen, Apple would need to take the content business by storm and surpass Netflix. The only way to possibly achieve such a feat is by acquiring Netflix, a future which looks increasingly out of reach as Netflix’s market cap spiked again to $111.3 billion as of writing.

Yet Apple Music made an immediate impact on the music streaming industry by doing little more than essentially mimicking Spotify’s moves to propel it up the ladder. It may be too late to copy the Netflix recipe for success, particularly with Amazon Prime Video in the mix, but Apple may surprise us all by buying a smaller content or streaming business. Its current strategy is to use Apple Music as a Trojan horse, gradually injecting the service with original content to lever fans towards video, which it may follow up soon by going all out in content and hitting subscribers with the inevitable price hike. There is of course the option that Apple pulls a new hit product out of the hat, were innovation not such an elusive gem within the modern-day Apple.

Apple Music’s monthly subscriber growth rate of 5%, compared to Spotify’s 2%, means Apple Music will overtake Spotify in the US market within the next six months, according to the Wall Street Journal, citing anonymous sources within the record business familiar with the figures. Spotify remains around 34 million subscribers ahead of Apple when viewed on a global footing.

Preloading all iPhones, Apple Watches and other hardware on the market, such as the Apple HomePod, with Apple Music has resulted in a rapid rise in users. On top of this, Apple has matched Spotify move for move by rolling out features such as personalized playlists, which Spotify has become famous for.

The key difference is that Apple Music has no free, ad-supported tier like Spotify, but frankly Apple has no need for this option. Spotify may end up scrapping its free version eventually as the majority of revenues come from subscriptions – another bad omen for the advertising industry.

Without a free tier, Apple Music has between three to four times the number of trial users compared to Spotify. Including these, Apple Music and Spotify subscribers are almost neck and neck in the US, according to the WSJ.

Apple Music launched just over two years ago and has grabbed 36 million paying subscribers worldwide. Spotify has been around much longer, launching in the US in 2008 after being founded in 2006, picking up around 70 million paying subs. US numbers have not been broken out but the global figures show Apple Music clearly does not pose an imminent threat to Spotify.

Apple has also benefited from operator partnerships where Apple Music comes bundled with free six-month subscriptions, while Spotify has targeted US students by packing in a Hulu subscription – users which are included in both firm’s final figures.

The next big thing to grace the music streaming industry will be Spotify’s IPO in the coming months. Despite its subscriber growth success, Spotify is notoriously unprofitable. Speculation says Spotify could IPO at $20 billion, while investment firm GP Bullhound has projected Spotify could be worth as much as $50 billion in a few years.