“Apple, the pioneer in selling digital music, has clearly met its match when it comes to streaming,” Emily Bary writes for Barron’s. “Last week, Spotify announced it had reached 50 million paid streaming subscribers. That’s more than double Apple’s base for its newer streaming service called Apple Music.”
Bary writes, “And while streaming seems to be offsetting much of the revenue lost to disappearing CD sales, it’s still not clear that it’s good business.”
“One notable media executive had some harsh words for streaming music services during a speech at a Deutsche Bank investor conference on Monday,” Bary writes. “‘We think it’s a very unattractive business,’ said Liberty Media CEO Greg Maffei, noting the high cost of music rights. ‘You’ve seen that with Spotify now with 50 million users [and] still not profitable.'”
Read more in the full article here.
MacDailyNews Take: Far be it for us to absolve certain Apple executives (Eddy Cue for example) by rewarding failure (that’s Cook’s job, it seems, as Cue still has one), but Apple Music hasn’t been around nearly as long as Spotify. Yes, it’s getting momentarily outgrown and that’s a worrisome sign of Apple Music’s piss-poor management that can’t even convert the richest demographic by far into $9.99/month subscribers faster than Spotify can convert a bunch of coupon-clipping Fragmandroid-settling cheapskates into paying customers, but that’s likely just temporary (assuming Apple someday finally gets their shit together on this).
And, no, Planet of the Fscking Apps isn’t the answer to selling more Apple Music subscriptions, geniuses.
Still, that said, as we wrote in February 2016, “Apple Music launched in over 100 countries. That’s an average of fewer than 110,000 subscribers per country since last June. Maybe there just aren’t that many true music lovers out there? It seems like most people are happy enough to be music dabblers for the price of free, even among well-heeled Apple users.”
Even if Apple bought Spotify this afternoon and combined their 50 million with Apple Music’s 20 million, they’d only have 70 million subscribers. And, remember, they’re not all paying $9.99. Both Spotify and Apple Music have $4.99/mo. plans for “students” (wink, wink). Even if they were all paying $9.99 on average, that’s gross revenue of $699.3 million/month. That’s not pocket change (but it’s not a lot of money for Apple either, which reported revenue of $78.4 billion last quarter) and that’s before paying out the music royalties, the costs of running and marketing the service, the costs of producing brain-dead rip-offs of Shark Tank and The Voice (focused on apps, no less), paying Eddy Cue $22.8+ million a year to not get content deals for Apple TV, paying Jimmy Iovine only-God-knows-what to bullshit you to death 24/7, etc., etc., etc.
Obviously, Apple feels they need to continue to have a major presence in music. It keeps the brand young. It helps to sell iPhones, etc., but streaming music just isn’t a huge money-maker. Maybe if it morphed into a streaming content play it’d be a better business, but, of course, it’s named “Apple Music,” (even though it has videos, video interviews, and is soon adding “TV shows”), so, to make more sense to prospective subscribers, it’d have to be renamed, re-marketed, etc. For now, Apple’s just in it because they feel they have to be in it, not to make money.
Spotify hits 50 million paid subscribers – March 3, 2017
Eddy Cue: ‘Planet of the Apps’ is another way to sell more Apple Music subscriptions – February 14, 2017
Apple Music still trails Spotify’s growth rate – December 19, 2016
Apple Music surpasses 20 million paid members 17 months after launch – December 6, 2016
Apple offers students half-price $4.99 Apple Music subscriptions starting today – May 6, 2016
[Thanks to MacDailyNews Reader “Tom R.” for the heads up.]
Regarding the MacDailyNews Take:
Lots of people just use YouTube for music. And because it’s so familiar to everyone like searching in Google, streaming music must compete with this medium. Especially when we can see that YouTube is free.
Streaming is great. And I have a room filled with physical media too. I have both services and it’s worth it to me. I also still buy vinyl so I think that people are willing to pay for it if it’s good.
Labels still make fortunes off of catalog items and licensing, so there is money to be made. I just wish the next phase of music would get here already…whatever it is.
Spotify is more useful, better features, more user friendly/controllable.
AM has bigger library and part of the iOS ecosystem.
Music is rapidly evolving and we are still in the middle of the process.
Will Spotify survive? Probably not if they can’t make money. It’s a tough business when you only have one source of income. Maybe they will persuade enough players to buy into the IPO.
It’s hard on these pioneers but they certainly have helped the industry move forward. Apple started it but these guys helped push the subscription model.
Sounds like what everyone said about Amazon — until Amazon put most other retailers into bankruptcy.
The subscription model sucks for most people and Apple isn’t willing to compete on cost against focused competitors.
The problem may well be in the user interface. In order to access Apple Music, one must use iTunes. And because iTunes does so many things, users get lost in the interface. Some of the things are rather unintuitive, and the entire thing is a bit messy for an ordinary inexperienced user.
Spotify, on the other hand, has only one feature: music streaming. The application is fairly lean and straightforward to navigate.
I only have anecdotal experience of one user (my daughter) who has been on Spotify for some time when I signed up for family Apple Music plan. She tried it (on her MacBook Air) and went back to (free, with commercials) Spotify. She couldn’t figure out how to remove songs/albums she had added to her AppleMusic account; not just how to delete the downloads, but how to completely remove the stuff from the account. I’m not even sure if you can do this, once you add a track/album to your Apple Music account.
The point is, objectively, user interface is not as clean and optimal as on Spotify, (which is painful to say), which may be a strong reason for the slow conversion rate.
More than 9 out of 10 Apple Music users are using iPhones or Android phones via the Music app, not iTunes. Apple’s obviously not worried about the Mac/Windows iTunes’ users’ Apple Music experience.
yet another Pipeline rupture…
Make insanely great again…Dump Pipeline Timmy.™
The whole music streaming thing is group think gone wild.
The music distributors got filthy fucking rich selling the same damn music to Baby Boomers first on LP, then on Cassette, then on CD and later on Digital Download (many re-bought rather than ripped music). That was a one time sugar high for each technology, yet the industry decided that amount of money was normal. They were wrong.
The Album is largely dead unless you are a collector buying Dark Side of the Moon, Close to the Edge, The White Album, Born in the USA, Thriller, Rattle and Hum or some other Rock Era album. Jazz and Classical are special, so let’s set them aside.
Pop Music has come full circle back to singles. People do not buy Albums- they cherry pick the singles they want. If one rolls the clock back to the 1950-60’s when the 45 was the shit, you will see prodigious output from artists- not an album every 3-4 years. If you let your song fall off the charts without a replacement you risked the end of your career unless you were the Beatles or Stones.
What the music business has failed to admit is that the business model has changed. Artists used to make their money on record sales and toured in support of record sales. Now Artists make little from record sales and make more money touring. Not sure that is likely to change whomever owns the labels or how they are distributed.
Eddie Cue is an ignorant asshole who seems clueless and/or incapable of dealing with a disrupted business model. Apple can go to war with the RIAA Cartel and deal with artists directly if it chooses to as they are as redundant as a Buggy Whip on a Porsche. Let artists distribute their content, price it as they see fit, release it on their terms and Apple takes an agency fee as with the App Store.
Also, by ignoring higher quality Digital Downloads Apple is leaving money on the table. Just as iTunes Plus once allowed the 128 DRMed AAC sampled iTunes purchases to be upgraded to 224 AAC without DRM for a nominal fee, re-launch iTunes Plus where we can upgrade our purchases to Apple Lossless files. Many great recordings of Classical, Jazz and Acoustic Music would greatly benefit.
And what of live streaming concerts on the Apple TV exclusively on a Pay Per View Basis? Apple already has the festival App that streams yearly. Why not an Apple TV App where we can buy live streaming performances exclusive to Apple in full HD with Dolby 5:1? I am sure artists would love to be able to reach their audiences and rake in cash through live events, commercial free that they control without the FCC rules. If you live in a small city where concerts never go , would you not like to pay for a streaming live event that you could invite your date and friends over for?
As to Indie Film, many of these movies have very limited release schedules and only in a handful of cities. Why not offer live stream of new Indie Films on the Apple TV on a Pay Per View Basis concurrent with the in person premiere?
Why has Apple not bid for the Academy Awards, the Grammys and The Tonys for a commercial free streaming experience? Why not bid for live Theater shows for additional Pay Per View?
Steve Jobs used Apple’s cash like a weapon. He loaned suppliers low cost money to build facilities to supply Apple’s manufacturing supply chain and locked in both supply and set prices for stuff like memory chips. Why not use the cash hoard to buy content to distribute on an exclusive basis or as an exclusive experience (let ABC run the Academy Awards with ads and Apple without for PPV$).
The whole media business is changing and has changed. Apple is not taking the lead, is not using it’s advantages and seems totally clueless as to how to proceed. They are trying to sell sand on a beach full of sand instead of selling Cold Drinks to thirsty beach goers.
Thinking Different seems a concept long lost at Apple.
@ DavGreg – you make some good points as usual but I think you are missing some key issues here.
For every rule one makes up, there are hundreds of exceptions. The music industry is volatile and unpredictable for several additional reasons you don’t identify. The music industry is so much more than streaming and album sales. Look, aging artists like Billy Joel who haven’t released fresh material in many years can still go to Madison Square Garden and make over a million dollars per performance. And there are hundreds of thousands of kids putting their performances onto Youtube for free. Averaging out the extremes into simplistic statistics tells us nothing.
Everyone rushes to malign music distributors when the reality of that era was that they were just selling what technology allowed them to sell. Until the CD, every media format wore out, so they obviously sold improved formats every generation. And let’s face it, with iTunes, Apple became one of the worlds largest music distributors. And Apple charged just as much for a compressed MP3 album with no art, no booklet, no lyrics, etc as the CD distributors were selling. So I don’t blame older music distributors for their inefficiencies, most of them actually offered a pretty good product in their time, with tons of service too. Good old American capitalism created these business models, it’s always about profit maximization. Apple thinks that cutting out physical media means that all the costs formerly spent there should now be funneled to Apple.
Problem is, Apple doesn’t have but a small fraction of the great music library created before digital computers ruined music. You can still listen to your 1984 compact discs, however. That’s when the recording industry suddenly took a turn for the worse – the train wreck just took a generation to pile up. As digital tools turned up, great songwriting and performances that took enormous effort and talent have been replaced by pitch correction and digital manipulation, easy sampling and copying. Sorry, but I already own the original song. I don’t need to hear it resampled with an annoying digital drum track and some thug rapping over top of a formerly great melody. Music sales have fallen because like so many industries, cheap digital junk has replaced old fashioned craftsmanship.
Up until the digital era. artists assumed that they could enjoy a lifetime of income if they made just a few decent albums. Now they know that the value of the individual song or album is falling rapidly because of sheer numbers of competitors, old and new. Digital media on disc or on download is a lifetime purchase, it never degrades, and the volume of music available is bigger than ever. Getting noticed is probably no more difficult than it ever has been, but selling your product is actually a ton of work. Very few artists have the energy and money like Beyonce to control the media and gain huge corporate backing, plus unpaid blogger adulation no matter how boring and uninspired her music is. It requires selling your soul to corporate interests to be always in the spotlight. Single versus album format has nothing to do with it. It’s all about worldwide media distribution using all modern channels. So obviously the most successful artists have professional corporate legions managing their publicity.
For the average musician, however, superstardom is not a reality. It has gone full circle: recorded media is worth little, live performances are special and still important to fans. Artists once again have to put in the energy on the road in order to make a living.
As for Apple, you are correct, they have missed so many obvious opportunities, it’s an embarrassment. They are chasing competitors, they are not innovating in any way. By being just another corporate entity pushing the same few artists with their “curated” music efforts, they are doing no favors to artists. By offering such a convoluted interface and poor quality media with screwed up metadata and nothing resembling the liner notes that used to come with every album, Apple is doing fans and collectors no favors. They are just cashing in on subscriptions for profit maximization.
I recommend people go to live shows and buy the CDs at those shows that the artists are selling. That is what keeps the music industry alive.
Actually Apple can slap DRM back on your music without much problem. Back when Crapple Music launched, some customers found their devices had replaced non-DRMed tracks with DRMed tracks. If it can happen by accident it can happen by intent.
I pay annually for iTunes Match whee non-DRMed copies of all my music are backed up on line. Despite that, I occasionally get prompts that “this device is not authorized to use this content” and the file is not an M4p (DRMed ) file.
I suspect the iTunes content market m4a is actually DRMed with the protection turned off and Apple can re-activate it at any time. And under the DMCA any attempt to circumvent DRM is a violation of US law. So no, you really do not own your digital content.
Have you heard of DistroKid.
They are the LARGEST distributor of music online right now.
And they MOST ARTIST friendly.
In fact they only have 3 or 4 employees.
All the useless Music Business jobs have been replaced by computer scripts.
$19.99 a year for an artist to release UNLIMITED tracks to ALL important online sources *AUTOMATICALLY* %100 percent of profit goes to artist… distrokid takes NO CUT.
There is also Band Camp
Here is a link to Band Camp, an Indie service that bypasses the Labels.
distrokid also bypasses labels, and puts your music on all the services.
myself, I use distro and bandcamp.
%100 to me, no matter where they buy it.
distrokid will even scan youtube and get you royalties.
distrokid (and services like it) are the future. autonomous systems that don’t require 1000’s of overpaid desk workers pushing papers to milk artists.
It is a terrible business model IMO. Why don’t we just rent the clothes we wear as well?
The Apple Music interface is crap compared to Spotify that’s a big issue. Also streaming is just a bunch of crap in the second place I won’t be renewing my Apple Music subscription. I personally think it’s just a waste of money. $10.99 here $9.95 there before you know it you’re paying 100+ dollars a month for some ridiculous subscriptions
I buy my apps, music, software, content. Won’t subscribe to Office. Adobe, ProTools, or music. I now buy CD’s that I can add to iTunes or Amazon, I own them in various formats. I don’t want or need vinyl- I’d prefer reel to reel or higher quality digital. But no subscriptions.
I won’t comment much on the Apple Music except to say even when Spotify with 50 m subscribers is LOSING MONEY why is Apple NEGLECTING KEY STRENGTHS like Macs, Routers etc?
For the last couple of years we hear Apple keep pouring resources into music with Iovine gloating he’s ‘hiring xx hundreds of staffers, pouring money into new projects like Planet of the Apps and the famous ‘sex filled romp of Dr.Dre’s life’
WHILE we got Macs which (even with neglect) just made the most money at Apple after iPhone. 7 billion bucks last quarter. That’s more than iPad and nearly twice Watch, iPods, Beats, accessories, Apple TV (‘other Products’ category in the financials) COMBINED.
we’ve got Macs which are 3-4 YEARS old without updates. Thousands of users complaining regularly ( in 2014 stats already show 2 million Hacktintosh machines — Hackintoshes are hard to do and the number of people waiting for regular good desktop Mac must be much MUCH larger)
Apple produced ONE Mac Ad — ONE ! — in the last few years. Not even cheap web ads, promotions etc. That’s how much they care about Mac (they got dozens of Apple Music , Watch etc promotions )
(People flaming me saying the Mac is not neglected think about it: if Mac was a separate company it would be in the upper third of the Fortune 500 . Imagine a Fortune 500 company running ONE ad for a few weeks — for it’s entire line in a period of several years ! Or a company Apple’s size running ONE ad for it’s second most profitable product. Unbelievable. )
And for people who say Mac Pros shouldn’t be sold as they are ‘niche’ what about routers? One billion iOS devices sold, hundreds of millions of Macs , most of which need Wifi and ‘there’s no market’ for that? (Many of years ago I had 3 party routers, when I switched to Airports it was so much better as it was designed for my Apple network. Surely there is a market for this ‘seamless integration’… yet Apple ignores it — the core EcoSystem –, while they do Planet of the Apps.. ).
It seems that Apple senior management is in many cases out of control and Tim Cook is not focusing them.
We got SVPs doing Planet of the Apps, ‘romp’ of Dr. Dre’s Life, Christmas Trees, Coffee Table books (specially milled ‘Apple’ paper), furniture for Charities, fashion shows like the Apple sponsored Met Gala, finicking over doors etc at the Apple Campus to ‘iPhone standards’ (so that architects complain the ridiculous tolerances Apple (Jony Ive?) wants will make the doors stick when they expand… ) etc etc etc.
It’s as if SVPs are allowed to do HOBBIES as PRIORITY.
I’m NOT saying ignore all new stuff but Apple should not IGNORE its core strengths where it has the ADVANTAGES ( advantages like a kick ass OS in OSX etc):
fix the Macs, Cloud, Siri , The Education market, Routers, Monitors, a Pro IOS (iTunes as a iOS Hub is creaking… ) etc. BEFORE the fashion shows and Planet of the Apps if they can’t do them simultaneously.
It’s almost too painful to watch.
Apple flatly stated their disinterest in streaming music for YEARS! They saw no profit in it. They saw it as a minor niche without a future.
So maybe they were right.
‘We think it’s a very unattractive business,’ said Liberty Media CEO Greg Maffei, noting the high cost of music rights. ‘You’ve seen that with Spotify now with 50 million users [and] still not profitable.’
Yeah, but: Thank the RIAA for the exorbitantly high licensing costs. There is a very long history of the RIAA attempting to GOUGE the music steaming businesses. Their history with Pandora is the prime example. The RIAA and MPAA absolutely hate the future and demand that they live back in the 20th century. Thus the extremely low opinion their customers have of their businesses, which translates into a motivation to steal their media rather than rightfully pay for it. I’ll also add in the typically poor compensation these companies provide to their artists, another motivator for media robbery.
IOW: Clean your own houses RIAA and MPAA. You’re creating your own enemies through your consistent and long term bad attitude toward your customers. Play nice and your customers will respond accordingly. That’s a law of commerce. Figure that out, dummies.
There is no profit in streaming, and content in general is low margin hit or miss, when compared to Apple core business…Apple stop trying to Sony.
Maybe Pipeline should pay another three billion to Beats…that’ll fix it.
I don’t like to say never, so I will say that I, for one, do not foresee a day when I will pay to stream music. Or movies. Or subscribe to software. I buy what I use, and will not rent perpetually.
I have a massive CD collection. I also pay for a family plan for Apple Music. Totally worth it.