The race to win the hearts and minds of music listeners – and their streaming dollars – is one that has kept music streaming services competitive. This is ultimately what led to fights over exclusive releases as well as having the best original content, curated playlists and more. While Spotify is the service that has radically changed the way consumers listen to music since the platform’s debut 10 years ago and is often cited by the media as the king of streaming, new figures show that Apple Music is catching up and perhaps taking over. A recent report showed that Apple Music has a higher paying customer conversion rate than Spotify, which means they turn more potential customers into paying subscribers. The reports add to Apple’s recent third quarter financial reports that the service beat its competitor in total paid subscribers in the United States, Canada and Japan.
With his company Loup Ventures, technical analyst Gene Munster recently published a case study on how iOS affects music streaming and found that Apple is converting potential customers into paying subscribers at a rate 2.5 times faster than Spotify currently. Their research shows that Spotify still dominates the overall global market with 62% of global paid streaming subscribers (among Spotify, Apple Music and Pandora) and although Apple Music currently only holds 34%, Apple’s share has increased at a faster rate. The study considered the addressable market for streaming services, i.e. Apple Music is primarily used on iOS devices with only a small segment of Android users, while Spotify can be used on either another platform. Additionally, Digital Music News reported that Apple Music now has more paid subscribers than Spotify in the United States, Canada and Japan, which Tim Cook confirmed in Apple’s latest financial report for the third quarter of 2018. Munster estimated that Apple Music has 21 million subscribers in North America, while Spotify has 20 million.
Munster points to the seamless nature of the iOS integration as a benefit for Apple, as Apple Music comes preloaded on their devices and can be used on them, and they are also able to invite users to start a free trial and subscribe. He points out that this plays an important role in their conversion rate, in addition to the fact that iPhone users tend to have higher disposable income. This may just be the tip of the iceberg. As the study shares, “Apple Music has room to grow with just 45 million subscribers out of 780 million active iPhone users (6%) paying for the service.”
While both services offer student, family, and individual subscription pricing at the same price, only Spotify offers a free option. Spotify Free contains ads and does not allow on-demand listening like their Premium subscription, but it allows Spotify to potentially reach more users and also target them to convert them into paying customers. The only free option on Apple Music is for the initial free trial, and users then have to pay to continue listening with the service, which could eventually be an incentive to decide whether to pay or not. As with most free trials, for both services the saved card will be charged if not canceled before the end date, but as Munster points out, it’s made even simpler with Apple Music for iOS users. , because everything is tied to your Apple ID.
The family plan option on Spotify can reduce their numbers, as up to six users can share a family account instead of paying for their own individual accounts. Digital media news too reported that Spotify recently tried to crack down on the overuse of family plans after recent findings that out of only 35% of Spotify users who pay for a Premium plan, 24% of them have a family plan. Spotify reportedly sent emails to those with family plans asking them to check their GPS location to confirm that all users lived in the same house, but due to the backlash decided to continue to act on the request . Apple Music’s Family Plan option is an extension of its Family Sharing feature, which means that all plan users must be linked to a credit card for all users’ Apple ID purchases, which reduces the appeal of sharing such a plan with friends and extended family like many. Spotify users clearly do.
Ultimately, most music listeners are looking for access to all the music they want to hear, and ease of use in their ability to stream to their devices, access new releases, create playlists and maybe find new artists or exclusive content. Spotify has been in the streaming game longer and does a great job of curating personalized playlists for individual users and for different genres and moods, but perhaps Apple Music now has a leg up in pushing its functionality streamlined and easy to use on music listeners not yet paid or committed to a specific service. It would be interesting to see if new data suggests that not having a free-to-use option has a positive effect on paying subscribers, and how that might impact streaming options in the future. For now, not having a free option, along with a smaller family plan, could likely allow Apple Music to continue gaining ground on Spotify.
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