Swedish-based Spotify AB, the world's No. 1 music streaming service, by paid subscribers, may face heightened competitive pressure from one of America's largest tech giants. According to The Wall Street Journal, if smartphone maker Apple Inc. (AAPL) continues to grow its Apple Music subscriber base in the U.S. at its current rate, it should surpass Spotify as No. 1 in America as early as this summer. (See also: Pandora Restructures in Fight Against Spotify.)
Spotify, which filed for its initial public offering (IPO) earlier this year, is growing its user base in the U.S. at a rate of 2% per month, versus Apple Music, with a monthly growth rate of 5%. In general, the report reflects the larger risk facing the European company in the increasingly crowded music streaming industry as platforms compete to grab a share of the streaming business. A recent report by the the Recording Industry Association of America (RIAA) indicated that revenues from streaming services, up 48% over last year, accounted for 62% of total music industry revenue.
Apple Music Benefits From Popularity of its Devices
Spotify heads off against rivals such as Amazon.com Inc. (AMZN), Pandora Media Inc. (P) and Google parent company Alphabet Inc.'s (GOOG) YouTube. Last month, the service said it reached a subscriber base of 70 million. Apple Music told the WSJ that it now has 36 million paid global users, up from 30 million in September. In terms of people who are currently in free or deeply discounted trial periods leading up to a paid subscription, Apple Music is reportedly ahead of Spotify with three to four times the number of such trial users.
The report is great news for Apple as it doubles down on its service segment, comprised of its Apple Music, App Store and payments business. Last week, the tech titan posted the segment's revenues up 18% over last year. Apple Music, which has been boosted by the popularity of Apple's devices, is also set to benefit from the rollout of its HomePod voice-activated speaker, which will also have the service pre-downloaded. (See also: Tencent Music, Spotify in Talks Ahead of IPOs.)