Apple Music is a formidable competitor to Spotify. A result of Apple's acquisition of Beats Electronics, the service has the company's full support and investment. It has put an emphasis on radio and personalities, bringing in BBC host Zane Lowe for a live radio channel, Beats 1, that also features segments by popular artists like Dr. Dre and St. Vincent. Beats 1 is used by Apple to help attract subscribers. (Beats 1 is also the only part of the service available for free.) Spotify and YouTube Red listeners with ad-supported, on-demand music. Pandora will use its ad-supported free radio service to funnel listeners to its subscription service. Apple uses a personality-driven radio service. And, of course, Apple Music comes installed on Apple devices.
Although it's far behind Spotify, Apple Music's limited window makes its rush to 10 million subscribers an impressive feat. It normally takes a subscription service numerous years to surpass 1 million, and some, like Rdio, have gone bust trying. What's more, 10 million could soon become 15 million. Apple Music cast an even wider net when it launched on Android on November 10. Any new Android subscribers would still be using their free trial.
There were some doubts after Apple last revealed its subscriber count. How many trial users had forgotten to cancel their subscriptions after the free trial ended? To what degree was Apple Music a dalliance for listeners? Sunday's reveal about Apple Music numbers goes a long way in answering those questions. Hitting 10 million subscribers six months after launch and within three months after getting its first paid subscribers shows a large percentage of users were not simply flirting with a new service. Many of them stuck around.
The bigger issue is the impact Spotify and Apple Music are having on their competitors and the larger marketplace.
More metrics on the subscription market are forthcoming. Two groups of metrics provide insight into the state of the U.S. streaming market. One is the RIAA's annual report on shipments and revenue. It will have U.S. figures for both number of subscribers and total subscription revenue. Apple's impact will be relatively slight because its subscribers generated revenue only in the last three months of the year. In contrast, Spotify acquired subscribers throughout 2015.
An indirect method for gauging Apple Music's effect on the U.S. market will come from Pandora's earnings release. Pandora's third-quarter earnings showed Apple Music's free trial offer had pulled away some listeners and their listening time. Pandora CEO Brian McAndrews called it a "muted" impact that was "consistent" with what Pandora experienced after iTunes Radio launched in 2013. The next earnings release will show if Apple Music has continued to weaken Pandora.
Another indirect metric will be download sales. To the extent subscription services are a substitute for download purchases, uptake of subscription services is likely to speed the already declining download market. Nielsen Music numbers won't show an obvious effect from the cause, but a meaningful change in the numbers will suggest a correlation between subscription services and download sales. The loss of downloads is the ugly consequence of subscription growth. Since many people worry about the loss of download revenue -- songwriters especially are concerned about the loss of mechanical royalties -- and are unsatisfied by streaming royalties, these changes should be closely watched.
As for the global streaming market, the best data points will come later this year from the IFPI. The first will arrive will be the Digital Music Report in April. The second will be the annual Music Industry in Numbers report. It will provide global subscription numbers, both subscribers and revenue, and will break down revenue by country. If previous release dates are any indication, the reports will be released in April.
After fit and spurts, the music subscription has almost arrived -- it's not there just yet. Spotify and Apple Music have 35 million global subscribers between them. It's a good start, but it's only a start. SiriusXM Radio alone has 30 million subscribers in just the United States -- and it charges about $15 compared to the standard subscription price of $10. But Apple and Spotify are making great strides in getting consumers aboard the subscription business model.
The news may not be welcomed by all. The transition from downloads to streaming creates anxiety for rights owners and creators that worry download revenue won't be fully replaced by streaming revenue. Whatever the revenue outcome, subscription services are a natural and necessary evolution. Consumers want streaming products and have the mobile and home broadband plans to enjoy them. It's up to the music industry to provide the right services, and these new numbers on Apple Music and Spotify are good indications consumers are being given streaming services they want.