What you need to know
- Apple is converting paying customers to Apple Music 2.5x faster than Spotify.
- That's according to analyst Gene Munster.
- He says that only 8% of iPhone users pay for the service, leaving plenty of room for growth.
Analyst Gene Munster says that according to Loup Ventures estimates, Apple is converting paying customers to Apple Music at 2.5x the rate of Spotify.
In his most recent reportMunster states:
Adjusting for addressable market (we estimate more than 95% of Apple Music subscribers are on iOS), our estimates indicate that Apple is converting potential customers into paying customers at a rate 2.5x faster than Spotify. We believe this faster conversion is driven by consumers valuing integrated experiences, which Apple's ownership of iOS provides. Separately, iOS owners have more disposable income than the average Android owner, which also plays into paid subscriber adds.
Munster made the remarks in the context of discussing Apple's rumored subscription service bundle the company may release later this year. Commenting on how iOS ownership impacts subscriber growth on Spotify and Apple Music, Munster notes that Apple Music is growing at 2.5x the rate of Spotify on iPhone because of its integration.
Munster says that only 8% of active iPhone users pay for the service, around 82 million people. This also shows that there is plenty of room for growth in the segment for Apple. It's important to remember that Apple does not share its Apple Music customer figures, so these are based on estimates and tidbits shared by Apple regarding various milestones:
In April 2020, Apple CFO Luca Maestri indicated paid subscriptions for Apple Music was "up strong double digits." In July 2020, Maestri said Apple Music experienced "strong double-digit growth." Based on December 2019 estimates from Counterpoint Research of 68m paid subscribers, Loup estimates Apple Music currently has about 82m paid subscribers.
Munster and Loup Ventures also estimate that the "average Apple Music subscriber" pays around $7 per month for the service (there are different price tiers), meaning it currently equates to around $6.8 billion a year in revenue for the company. You can read the full report here.