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Apple Music Is Growing But Still No Match for Spotify

Dec 07, 2016

Apple Music's star is rising, but it's still trailing its chief competitor.

Speaking to Billboard and the BBC on Wednesday, Apple executives said that Apple Music now has 20 million paid subscribers worldwide, a 15% jump from the 17 million paid subscribers the company had in September. Apple told Billboard that its Apple Music subscribers come from more than 100 countries around the world, and more than 50% of them are living outside the U.S.

Apple released Apple Music about a year-and-a-half ago as a response to growing consumer interest in streaming instead of downloading digital music. Apple Music offers millions of tracks as well as curated playlists based on user taste. It's running across Apple's mobile devices, like the iPhone and iPad, as well as Macs.

To build its user base, Apple (aapl) has used the bundled applications to target its millions of customers around the globe who own its iPhones and Macs, and partnered with artists like Taylor Swift and Drake. The iPhone maker has also offered exclusive access to content to attract popular musicians' fans.

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While that has all apparently paid off, it comes at a cost. Apple told Billboard that 60% of its Apple Music customers haven't bought a single track from iTunes in the last year. Digital downloads, which are still available through iTunes, were once the lifeblood of Apple's music business.

Apple Music is also facing headwinds in its bid to become the dominant music source. The service is competing in a highly fragmented market with popular competitors like Spotify, Pandora (p), and artist-backed Tidal. And although Apple Music is growing at a rapid clip, it's far from supplanting the market leader.

In September, Spotify CEO Daniel Ek responded to Apple touting its then 17 million paid subscribers, saying that his company now has a market-leading 40 million paid customers. Neither Ek nor Spotify has said how many paid subscribers the company has now, but even if its growth is static, Spotify has twice as many paid subscribers as Apple Music.

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Spotify had 30 million paid subscribers in March, suggesting the company added more than 1.6 million paid subscribers per month between March and September. Apple has added 3 million paid subscribers in three months, or an average of 1 million paid subscribers per month. If that pace continues, Spotify could open an even wider lead on Apple Music.

Regardless, Apple Music and Spotify are generating significant sums of revenue on their services. Apple Music pricing starts at $9.99 per month for individuals and jumps to $14.99 per month for up to six people listening on the same account. Apple also offers a $4.99-per-month student membership. Spotify offers identical prices on its paid individual, family, and student memberships.

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