Although Apple (AAPL 0.20%) didn't launch Apple Music until June 2015, it's already overcoming the strong lead of Spotify (SNAP -4.06%) in the music subscription business -- at least in the U.S.
Apple first signaled that it was focusing more on Apple Music when it purchased music-discovery app Shazam out from under the nose of Spotify in late 2017. Ever since then, Apple Music's growth has sped up. While Spotify still has a comfortable lead over Apple Music worldwide, its lead in the U.S. has shrunk in 2018.
John Legend and Alicia Keys were two guests on Apple's show "Carpool Karaoke: The Series" that features stars singing their songs in a car. Image source: Apple.
Apple is quickly catching up to Spotify in the U.S.
Apple's recent growth has brought it right on the heels of Spotify in the U.S. A year ago, Apple had 13 million U.S. subscribers, which was still a good bit below Spotify's 17 million in the U.S. But this July, Apple is up to between 21 million and 21.5 million U.S. subscribers, not far off from Spotify's 22 million to 22.5 million, according to The Financial Times.
After Apple Music launched in the summer of 2015, it was adding about 1 million global users per month through the end of 2017. But so far in 2018, Apple Music's growth has skyrocketed to about 2 million global additions each month. Most recently, Apple Music reported 50 million global subscribers at the end of May.
By the end of 2018, Apple Music will be the top music subscription service in the U.S. with 27 million subscribers, versus Spotify's 24 million U.S. subscribers, The Financial Times reported. That means Apple is expected to add 1 million subscribers per month just in the U.S.
This growth is partly thanks to Apple's estimated 800 million active iPhone users. Having 800 million people to easily market its $9.99 per month music service to is a huge advantage. That's 800 million people whose phones come with the Apple Music app pre-installed, meaning Apple couldn't make it easier for them to sign up for the service.
Spotify is still the global leader — for now
Spotify may be losing its grip on the U.S. market, but it still dominates the global market for music subscription services. At the end of March, Spotify had 75 million paying subscribers worldwide and expects that to grow to about 100 million by the end of 2018. Meanwhile, Apple last reported it had 50 million worldwide subscribers.
As recently as this past September, Spotify seemed like it would always be a step ahead of Apple in terms of subscribers. Despite Apple Music being a newer service, it was only adding about 1 million subscribers per month while Spotify was adding about 2 million per month. But now Apple's growth has sped up, and it looks like it could eventually catch up to Spotify.
Spotify's main issue continues to be its lack of profitability. The company expects to grow revenue by 20% to 30%, to between $6.1 billion and $6.8 billion this year. That would represent a drop from the 39% revenue growth it saw this past year.
The big question: Which content strategy will win?
The next big step for both Apple Music and Spotify is to flesh out their respective content strategies. Depending on the quality of shows that Apple releases in the next year, it could gain a big advantage over Spotify, which doesn't have the same $270 billion cash pile on hand to invest in original content.
Apple released its first TV show, Planet of the Apps, on the Apple Music app last summer to mostly lackluster reviews. However, the shows it's currently working on are much bigger productions with big-name talent. Most recently, Apple signed a multiyear partnership for original content with Oprah Winfrey. The company also has a show with Reese Witherspoon and Jennifer Aniston in the works, as well as a series from Steven Spielberg.
Since Spotify could never compete at the same level as Apple in terms of original content, it announced a partnership with Hulu in early April. For $12.99 per month, subscribers can access Hulu's video on demand (with ads), as well as Spotify Premium. This year, Spotify also launched Spotlight, a platform that adds visual elements to podcasts and other audio experiences.
While Spotify is still the global leader in the music subscription space, the sudden pickup in Apple Music's growth means Spotify's position isn't as secure as it seemed last year. And considering Apple Music's big content plans, its growth will most likely speed up even more as its 800 million iPhones users take notice of its upcoming original series.
