(Hypebot) – Apple CEO Tim Cook recently announced that Apple Music has 6.5 millions paid subscribers. While a promising figure on its face, it seems unlikely that all these listeners will continue paying past the first month. This article breaks down Apple Music's most recent statistics, offering us some idea of where the streaming service is headed financially.
Guest Post by Mark Mulligan on his Music Industry Blog
Back in August when Apple announced it had hit 11 million subscribers I predicted that would result in around 6 million paying subscribers. Yesterday Tim Cook announced that Apple Music now has 6.5 million paying subscribers, which translates into a 59% conversion rate. Or at least 59% of trialists paid for at least one month. As I wrote back in August, Apple will lose a share of those subscribers who will cancel after one payment (i.e. the ones who’d forgotten to cancel their payment details). Somewhere north of 1.5 million of those subscribers will likely not make it through to a second month’s payment. Which would leave around 5 million of those as long term subscribers.
The Acquisition Funnel Needs Widening
Cook also stated that the total number of users is 15 million which means that there are 8.5 million active trialists. Given that all the 11 million trialists reported 6 weeks after launch are now either gone or are subscribers that means all of those are additional trialists which gives us a monthly trialist rate of under 3 million or a little under 100,000 a day. Which is way below the 315,000 a day Apple had during the first 6 weeks (which is to be expected) but also below the 175,000 rate I had conservatively predicted back in August. So Apple’s funnel is not yet performing as strongly as expected. Given that most of Apple’s advertising for Apple Music is branding focused at the moment, we could expect that rate to augment steadily over the coming year as that brand message beds in. And it could lift significantly if Apple shifts focus to product centric marketing i.e. what it normally does. (The Apple Music ad campaign is rare for Apple in that it doesn’t involve any product imagery).
10 Million Cumulative Subscribers By Year End
If Apple continues at the current rate it should get to around 10 million subscribers by year end, of which 6 million or so will be active (i.e. not churned). Which is again below my August prediction of 8.7 million because the acquisition funnel isn’t delivering as anticipated. In revenue terms that would deliver cumulative subscriber revenue of $220 million by the end of the year. Apple has earned around $140 million in total so far, of which $100 has gone to rights owners.
And we shouldn’t understate the scale of Apple’s success so far, narrow funnel or not. It took Spotify 4 and a half years to get to 6.5 million subscribers. Granted, it was a very different world back then and much of that growth had come without the US and of course without the benefit of Apple’s integrated ecosystem. But even those considerations accounted for, Apple has gone from zero to hero in a flash. In August I stated ‘Apple is on track to be the number 2 streaming subscriptions provider after little more than 6 months in the game’ and that is exactly where they are now.
To Restate Or Not To Restate
Music Business Worldwide cites an insider source that Spotify is on the verge of announcing its own new numbers. It will be interesting to see the fine print of how those numbers are reported. Spotify has seen an uptick in subscriber growth at the same time it introduced its $1 a month for 3 months promotion, which is effectively a paid extended trial. Here’s the conundrum. If those numbers are reported as subscribers then expect terrible churn (for subscriber numbers) but if they are reported as trialists then conversion rates will be great but total subscriber numbers will not. Common sense would dictate Spotify reporting those numbers as subscribers (they are paying after all) but that means at some stage Spotify is going to have to restate its numbers or provide some additional guidance. Which incidentally Apple will also eventually have to do if it reports it cumulative 10 million subscribers at year end / early 2016 rather than the active subscriber number of around 6 million.
Apple and Spotify are now locked in a metrics arms race. Both will use every trick in their respective arsenals to make those numbers look as good as they possibly can. Whatever the outcome of that particular little spat, today’s numbers show us that even below its best, Apple just ran the first lap of a 5,000 metre race as if it was a 100 metre sprint. Let’s see if Apple can run an entire Mo Farah race at the speed of an Usain Bolt sprint.