March 28, 2018

Apple Music and Spotify Compete for Subscribers

According to a recent report in the Wall Street Journal, the gap between Spotify—a music, podcast, and video streaming service developed by Spotify AB, and Apple Music—a music and video streaming service developed by Apple Inc, is starting to narrow. For a while, Spotify has been a favorite of music lovers in the U.S and around the world. But, it finally has competition as Apple Music and Spotify look set to compete for subscribers. I like them both, but here are the details:

In January this year, Spotify confirmed its seventy million subscribers, reaffirming its position as the world’s premier streaming service. While Apple music is starting to compete for subscribers with Spotify, it is still a distant second with about thirty million subscribers as of September 2017. However, latest reports in the Wall Street Journal and a few other publications show that Apple is gaining subscribers in the U.S at a higher rate than Spotify, with Apple Music’s subscribers growing by 5% each month compared to Spotify’s 2%.

While Apple Music is gaining an edge in the local market, Spotify continues to lead globally, with the Stockholm based streaming service having twice as many paid subscribers as the streaming service of Apple Inc. This is nothing less of an achievement when you consider that all iOS devices come preloaded with Apple Music’ services and that Apple Inc has presence in more markets than Spotify.

The Duel Pre-2018

In 2005, Martin Lorentzon and Daniel Ek co-founded Spotify—the music streaming service, in an apartment in Sweden. A year on, they launched the service in Europe. It took Ek and Lorentzon four more year to finally enter the U.S market but it didn’t take Spotify long to become popular in the country, with features such as New Music Fridays and Discover Weekly playlists helping the cause. In 2011—just a year after entering the U.S market, Spotify announced that it had reached a million paid subscribers.

In 2015, Apple Inc decided to launch its own streaming service called Apple Music. Considering Apple’s might and past successes, people and experts started to predict that doomsday was imminent for Spotify. And, this prediction came true to an extent. In a little over a year, the American multinational tech company claimed half of Spotify’s users. However, Spotify refused to give in to the might of Apple Inc. And, this paid dividend.  From the start of 2016 till the mid-2017, Spotify’s user base grew exponentially and in June 2016, the Swedish based streaming service announced that it had reached sixty million subscribers. This was 33 million more than Apple Music’s user base around the same time.

The above strengthened Spotify’s plans for a direct listing. In the summer of last year, a few leading publications reported that the listing would take place near the end of 2017 but nothing has materialized yet. However, the company’s plans for a direct listing are very much alive and the listing may occur sometime soon. In case you weren’t aware of it, a direct listing allows companies to go public without actually going public. Confused? Well, don’t be! In a direct listing, a company does not publicly sell its shares. Instead, the listing allows insiders and early stockholders to directly sell their shares on an exchange.

In 2015, Spotify was valued at $8.5 million. Considering that it had increased its user base exponentially since then, Spotify’s value is likely to be a lot more when its direct listing finally happens.

The Battle in 2018 and Beyond

As mentioned earlier, Apple Music—the streaming service developed by Apple Inc, is starting to close the gap on its Swedish counterpart Spotify in terms of paid subscribers. Since the end of 2017, Apple Music has been growing its user base at the growth rate of 5% and if this trend continues till the summer, then Apple’s streaming service will overtake Spotify in terms of user base or paid subscribers.

In September 2017, Apple Music had thirty million paid subscribers. Today, that number has increased to thirty-six million. While Spotify managed to hold its ground for a few years after the launch of Apple’s streaming service, it will have a tough time doing the same in 2018 and beyond. Spotify has already started to lose subscribers to Apple Music and Apple’s streaming service will only get better, which will increase its lure and make thing incredibly tough for the streaming service headquartered in Stockholm, Sweden.

While both Spotify and Apple Music have made the total number of subscribers they have public, they haven’t revealed where these subscribers are based, which means that the number of Spotify and Apple Music subscribers in the U.S are not known. However, the U.S subscribers of both these streaming services are likely to be in the millions when you consider the amount of people in the U.S subscribed to streaming services.

While Apple Music is expected to claim top spot at some point this year, the battle for subscribers will continue beyond 2018. Spotify won’t lay down its arms and surrender so easily. Instead, it will fight till its last breath or till it makes economic sense to do so.

Till 2018, Spotify enjoyed an edge over Apple music in terms of paid subscribers. However, this is expected to change in 2018 as Apple Music grows its user base at a rate of 5% compared to the 2% growth rate of Spotify. The paid subscribers count of Apple Music is expected to surpass the same of Spotify by summer this year. While Apple’s streaming service may overtake Spotify this year, expect the Stockholm based streaming service to make a comeback in 2019 and heat up the battle once again!  Makes me want to pull up some Coldplay and chill.  😉

by Bobby J Davidson

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