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Today’s memo is about Apple Music, which turns ten in June. We got a head start on its upcoming anniversary by asking the real question.
Has Apple Music been a success? You can listen to me and Tati Cirisano from MIDiA Research break it down here, or read below for one of my takeaways on the service. Let’s dive in.
Has Apple Music Been a Success?
Ah, it feels like yesterday when Tim Cook, Drake, and Apple’s SVP of Services, Eddy Cue, introduced Apple Music at WWDC 2015.
It was a not-so-bold appearance for Drake, who had 19 million reasons to be there. But it was a big move for Tim Cook and Eddy Cue, who zagged from Steve Jobs’ belief that music should not be sold as a subscription.
Ten years later, has Apple Music been a success? That depends on your perspective.
For Apple?
Apple Music reduces churn for iPhone upgrades and amplifies the company’s brand. That brand is why Apple can sell higher-priced products than its competitors, and it’s worth investing in that brand.
Let’s do some math. Assume that Apple Music’s estimated 110 million users bring in a very generous $7 average revenue per user per month. That’s $9.2 billion in annual revenue. Since Spotify’s operating expenses in 2024 were over $15 billion, it’s tough to believe that Apple Music’s operating expenses would be less than $10 billion. Could Apple Music’s annual losses be even higher than the $1 billion annual deficit for Apple TV+?
Yet Eddy Cue and the team have not pulled the plug or divested the business. The ecosystem benefits of Apple Music must still outweigh the costs. But as streaming growth has slowed, especially in markets that Apple is strongest in, it’s hard to see a future where Apple pushes the product as hard as it did in streaming’s growth phase in the late 2010s. The Super Bowl Halftime Show sponsorship and a few occasional product tweaks might be good enough for Apple.
For the music industry?
About 20% of paid streaming subscribers globally use Apple, and those users are concentrated in higher-priced markets. The major record labels love that Apple’s users are all paid users, but don’t like that growth has slowed down compared to its competitors with free tiers. It’s a classic catch-22 in music, where the industry’s pursuit of the upfront bag can have long-term consequences.
It’s also a textbook principal-agent problem. The major record labels want to grow the pie, raise prices, and add more tiers. It’s not that Apple doesn’t want to be a good steward to its music partners, but Apple Music’s priority is Apple. Let’s not forget that. Its parent company has its own set of priorities.
Listen here: Spotify | Apple Podcasts | Overcast
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