Apple Music expected to grow 40% annually for next three years, drive Services growth

Posted:
in iPod + iTunes + AppleTV
An analyst predicts that Apple Music's dramatic growth over the next three years will be another major factor driving services revenue upward, but may push down overall margins.

Tim Cook Apple Music


The figures were predicted in a note to investors, written by Ben Schachter of Macquarie Capital, and read by AppleInsider. Schachter believes that Apple Music margin is around 15 percent, mostly because of the rates it pays artists. Spotify claims 24 percent, but is still facing lawsuits about compensation, so this may drop in the same time period.

Apple Music subscriber numbers alone are up by 10 million subscribers since September, hitting 40 million at the beginning of April. Schacther's numbers are a near-linear extension of that growth, and it appears that the analyst is predicting the same subscription rate, and not any dramatic increase in growth rate to speak of.

But, Apple's future moves in services, and possibly tied to Apple Music subscriptions, include a number of video efforts, with a suspected growth of video content budgeting swelling 54 percent every year through 2022 up to $1 billion in total. Any video on demand service anchored by these videos is expected to have a head start with about 75 million likely subscribers including those already subscribed to Apple Music according to recent predictions on the matter.

Apple's services revenue growth went mostly un-noticed until Apple CEO Tim Cook said in 2016 that he predicted that the segment alone would be the size of a Fortune 100 company before the end of 2017. Apple hit that goal on August 1, 2017, catapulting into 97th place ahead of Facebook's entire business.

Apple Services revenue per quarter


The latest report about Apple Music's contribution to Apple's revenue comes on the heels of a new discussion about Apple's App Store versus its competitors as well. Recent U.S. data from Sensor Tower claims that Apple's U.S. App Store customers generated $58 per user, versus Google Play's $38.

In its most recent quarter, Apple posted $8.5 billion in revenue in its services category, up 13 percent year over year.

Main competitor Spotify's IPO paperwork revealed it has 71 million paying users. In 2017, the service recorded 159 million monthly active users mostly on the free tier, who streamed 40.3 billion hours of content, U.S. Securities and Exchange Commission filings show.
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Comments

  • Reply 1 of 22
    ivanhivanh Posts: 129member
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
  • Reply 2 of 22
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    Thanks for sharing.  My mind is at peace. /s
    asdasdjbdragonlostkiwiwatto_cobra
  • Reply 3 of 22
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    Didn't know Spotify offered this ... cool!
    jbdragonnetmage
  • Reply 4 of 22
    macxpressmacxpress Posts: 4,211member
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    What about new songs that come about? 
    netmagewatto_cobra
  • Reply 5 of 22
    lkrupplkrupp Posts: 5,874member
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    So what happens to your personal collection when Spotify goes out of business in a couple of years? Pandora?
    jbdragonmacxpresspotatoleeksoupjony0watto_cobra
  • Reply 6 of 22
    adm1adm1 Posts: 752member
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    I didn't know Spotify did this, I have at least 80% of my favourite music in mp3 format and a spotify subscription - what do I do to get the 80% discount? /s
    jbdragonnetmagemuthuk_vanalingamlostkiwicornchipjony0watto_cobra
  • Reply 7 of 22
    asdasdasdasd Posts: 4,996member
    I can see Apple bundling services in the future. I am definitely on for a TV subscription when that gets going, although I won't abandon Netflix ( its all cheaper than the satellite option I abandoned years ago anyway). Not as interested in Music, but if music were bundled at $5 per month more then, who knows. And what if a 50Gb cloud service was bundled in for a few extra dollars? 

    There are 1.3B devices and probably 500M or so individuals in the ecosystem. Huge market there. 
    edited April 18 potatoleeksoupwatto_cobra
  • Reply 8 of 22
    slurpyslurpy Posts: 4,983member
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    I'm not sure how Apple Music will survive if you stay with Spotify. I'm sure this revelation will keep Apple's execs up at night. 

    jbdragonlostkiwipotatoleeksoupcornchipjony0watto_cobra
  • Reply 9 of 22
    It seems that Tim Cook wants Apple to scratch your pocket every month. In addition to the rental music service he recently approved buying Texture which is an all you can eat Magazine subscription that they apparently will integrate into iOS and the Mac. At this rate, can we expect Apple to buy a streaming video service?
  • Reply 10 of 22
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    I didn't realized Spotify gives an 80% discount off it's paid service for me having songs and albums I already own. That's a flawed business model I could really get behind! (currently holding puts on Spotify).
    watto_cobra
  • Reply 11 of 22
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    It doesn't work that way... And Spotify won't give you an 80% discount either. [eyes rolling]
    watto_cobra
  • Reply 12 of 22
    asdasdasdasd Posts: 4,996member
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    The 80% doesnt make any sense. 80% of my collection is about .001% of Spotify's collection. Probably the same with yours. How can Spotify or Apple know the exact 20% you think will finalise your connection? 


    watto_cobra
  • Reply 13 of 22
    I like how people are holding back their money from Apple Music (really). I recently switched to a paid membership after relizing that I was paying about $50 dollars a month in iTunes gift cards for my 7 kids to get the songs they wanted. Now I pay the family rate of $15/month. I actually get an opportunity to listen to music beyond my outdated playlist. And as for future offerings of the video content. I should preference that by stating that I work for a tv svc and don’t pay for content but would deffinently pay a little extra for that content 
    lostkiwiGeorgeBMacwatto_cobra
  • Reply 14 of 22
    macxpressmacxpress Posts: 4,211member
    lkrupp said:
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    So what happens to your personal collection when Spotify goes out of business in a couple of years? Pandora?
    I was gonna post this too...Spotify's business model isn't a sustainable one IMO. I find it hard to believe they're making significant amounts of money (if any money) and they don't have anything else to fall back on like Apple does. Even if Apple Music doesn't make Apple any money as a service, they have other services and hardware (such as HomePod) to make up for any lost revenue. Apple may not have the amount of paid users as Spotify right now, but I think their day is coming. 
    cornchipwatto_cobra
  • Reply 15 of 22
    macxpressmacxpress Posts: 4,211member

    It seems that Tim Cook wants Apple to scratch your pocket every month. In addition to the rental music service he recently approved buying Texture which is an all you can eat Magazine subscription that they apparently will integrate into iOS and the Mac. At this rate, can we expect Apple to buy a streaming video service?
    So I other words, you have an issue with Apple building a services sector of Apple? Apple has to keep expanding into other areas. Apple cannot survive in the future just selling Macs like some wish they'd go back to focusing on, or they cannot survive on just iPhone sales forever. They need other sources of revenue and you might as well do it while you can instead of when you start to struggle and people lose credibility with your business so you don't want anything to do with them while they're faltering. I'm not saying Apple is gonna falter anytime soon, however nobody stays on top forever. Every top company I've seen strays away from the main path eventually and starts to go downhill...Apple has already experienced this once as have companies such as Microsoft, Dell, HP, etc. 

    Nobody is forcing you to give Apple your money on a monthly basis. If you don't want Apple Music, then don't use it. If you don't want to subscribe to a digital magazine then don't. If you don't want to pay for a larger iCloud Drive then what Apple provides you for free, then don't. 
    edited April 18 muthuk_vanalingamfastasleepwatto_cobra
  • Reply 16 of 22
    Awesome!
    watto_cobra
  • Reply 17 of 22
    steven n.steven n. Posts: 1,004member
    ivanh said:
    If I already have 80% of songs and albums I like in my personal collection, will I get 80% off for subscribing to Apple Misic? If not, I’ll stay with Spotify.
    You pay $2/month or so for Spotify?
    watto_cobra
  • Reply 18 of 22
    Could we also get lossless or even hi-res music streams/sales on iTunes/Apple Music? I’d happily pay extra... don’t get me wrong, Apple’s tweak of AAC+ is the best sounding compressed stream out there, but lossless is just better...
    lostkiwiartdent
  • Reply 19 of 22
    FolioFolio Posts: 200member
    asdasd said:
    I can see Apple bundling services in the future. I am definitely on for a TV subscription when that gets going, although I won't abandon Netflix ( its all cheaper than the satellite option I abandoned years ago anyway). Not as interested in Music, but if music were bundled at $5 per month more then, who knows. And what if a 50Gb cloud service was bundled in for a few extra dollars? 

    There are 1.3B devices and probably 500M or so individuals in the ecosystem. Huge market there. 
    You bet. And consider much of the video will at some point become platform agnostic. 
    asdasdwatto_cobra
  • Reply 20 of 22
    Apple has other income streams that can support Apple Music at low margins. Apple Music does not need to be a knockout. Like Apple Pay, it keeps people in the ecosystem. Spotify's royalties to artists are weak compared to Apple Music. Apple can squeeze Spotify. And it comes under the banner of supporting artists. Spotify is not doomed, but I would bet on Apple Music, esp with their decent growth.
    watto_cobra
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