November 24, 2017

The New Apple’s Million-dollar Business

Apple-Music

By Nina Mulamba

The Apple Music, which was launched in June, would join the iPhone, iPad, Mac, iTunes and Apple TV as the company’s billion dollar businesses. Apple Watch will also likely reach that mark this year too.

Apple Music now has 15 million subscribers, the company’s CEO, Tim Cook announced at a Wall Street Journal technology conference in Laguna Beach, California. Of those 15 million, 6.5 million are paying customers; the other 8.5 million are still on Apple’s free three-month trial. Subscribers pay Apple $10 a month for access to unlimited streaming music.

When we do the mathematics, 6.5 million times 10$ a month times 12 months in a year will see Apple pocket $780 million. That’s not quite a billion, but Apple only needs to convert 1.8 million more of the free-trial subscribers to reach that mark.

Apple Music’s success is particularly impressive, considering the mixed reviews that Apple Music has received, particularly when compared with Spotify. This is seen as a success due to the fact that the brand new streaming music service is taking on a giant field of strong incumbents that includes Spotify, Pandora (P), Amazon (AMZN, Tech30), Google (GOOGL, Tech30) and a sea of other contenders.

“This is completely at odds with the feedback that the service has received where Spotify offers a better experience with a much richer feature set at the same price,” noted Richard Windsor, analyst at Edison Investment Research.

The appeal isn’t hard to understand, though as the Apple Music automatically appears on the home screens of customers who have recently purchased new iPhones or iPads, or upgraded to the new iOS 9 software. One will therefore be able to sign up as simple as clicking a button since Apple already has ones credit card information.

“This is one of the clearest demonstrations yet of how important it can be to control the platform upon which a service is to be sold,” Windsor said.

Cook’s announcement implies that about 60% of Apple Music customers stick with the service after the free trial. Apple (AAPL, Tech30) is one of the few brands in the world that can enter a market and create a billion-dollar business in a few months.

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