As the music rivalry between Apple Inc. AAPL and Sweden's Spotify intensifies, Benzinga looked at which service scores over the other and has emerged the frontrunner.
Brief Recap Of Services
Spotify, launched in October 2008, offers digital rights management-protected content from record labels and media companies. The company provides access to over 30 million songs and boasted of 100 million monthly active users as of June 2016. As of September 2016, Spotify had 40 million paying subscribers.
The service offers basic services for free but charges for additional features in the form of paid subscriptions. Thus, the company derives revenues by selling premium streaming subscriptions to users and advertisement placement to third parties.
Apple's iTunes, a media player, media library, online radio broadcaster and mobile device management application, was launched in 2001. ITunes allows preview of new albums for free, but to listen to the entire album or a track, you need to pay. Meanwhile, Spotify's paid subscription allows you listen to the album absolutely free.
Later, Apple launched Apple Music in direct competition to Spotify. Apple Music allows users select music to stream to their device on-demand or lets them listen to existing curated playlists.
This service, launched on June 30, 2015, comes free for subscribers for three months and then becomes a paid-only subscription. The company's paying subscriber-count stood at 20 million as of December 2016, up from 17 million in September. When Apple Music started in mid-2015, Spotify had about 20 million paying subscribers and the number has doubled since then.
Spotify Vs. Apple Music: From User Perspective
The monthly fee for paid subscription is $9.99 for both. The free service from Spotify carries ads, while Apple offers basic services for free. Spotify charges $5 per month per additional sure. Apple's family sharing plan is priced at $14.99 per month for up to six users. Along with the paid subscription, both allow offline listening.
Both allow adding users' own tracks to their streaming catalogs. Spotify allows you to add music files from your computer to listen along with the streaming tracks, and in Apple Music, all the tracks users have added into iTunes over the years, gets added automatically. Apple and Spotify claim to offer over 30 million songs each.
Monetizing The Service
Spotify gained an edge over iTunes through its pricing strategy. Instead of a pay-per model, one flat low monthly fee was an attraction for users, with Spotify successfully bundling music. Spotify has managed to give users more control over the songs and artists they listen to when compared with iTunes.
Spotify's revenues for 2015 rose to 1.95 billion euros from 1.08 billion euros in 2014. Roughly 89 percent of it came from subscription and 11 percent from advertisement. Meanwhile cost of revenues ballooned roughly 85 percent. Operating expenses also increased. Consequently, the company reported an operating loss.
Financial statistics released by Apple along with its fiscal fourth quarter results released in October 2016 showed a 24 percent increase in revenues from services to $6.325 billion, with analysts surmising that Apple Music and App store accounted for much of this growth. Exclusives offer an opportunity for these services to set them apart from the other, with Apple deriving the maximum benefit from this.
Given the early entrant advantage, Spotify has over Apple Music, its paid subscriber numbers are way ahead of Apple Music. However, Apple Music's numbers since its introduction is commendable. The competition, though turning cutthroat for the companies involved, should benefit music lovers, as they are being treated with the best of the service offerings. And this should be music to their ears.Image Credit: By Jon Åslund profile - Flickr, CC BY 2.0, via Wikimedia Commons
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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