Apple Music’s 13M Subscribers Take Away a Little of Q2’s Sting

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Apple's numbers were down across the board for its 2016 second fiscal quater, but music numbers were up. Apple Music showed a nice increase to 13 million subscribers compared 11 million in February, and that helped bring an end to what has been a declining market segment for the iPhone and Mac maker.

Apple Music numbers are on the rise even as overall company numbers declinedApple Music numbers are on the rise even as overall company numbers declined

CEO Tim Cook used Apple's second fiscal quarter earnings conference call to say the company's music business has reached the end of its downward slide. He said,

Our Music business has been declining, but we've hit an inflection point thanks to Apple Music. We think we've reached the bottom.

Spotify currently has some 30 million subscribers, which makes Apple Music seem relatively small in comparison. That said, Apple music is growning at a substantially faster rate. It took Spotify about six years to reach the 10 million mark, where Apple Music topped that in only ten months.

Assuming Apple really has hit the bottom point for its music business, it's likely we'll see Apple Music to continue to grow in the coming quarters. If so, there's a good chance we'll get an announcement bragging about even more subscribers when Apple Music hits its one-year anniversary in a couple months.

That comes as small bit of good news to go along with quarterly numbers that clearly disappointed analysts. Apple reported US$50.6 billion in revenue, just beating its own guidance but falling short of analyst expectations.

The company 51.2 million iPhones, 10.2 million iPads, and 4 million Macs during the quarter. Only the iPad beat analyst expectations. Apple doesn't report Apple Watch numbers, so all we know is that the company says it's still pleased with sales.

The Apple Music numbers, however, show services are playing a more significant role in the company's bottom line. Quarterly revenue for Apple Music, iCloud, Apple Pay, iTunes, and the App Stores hit $9.9 billion, which doesn't come close to the revenue the iPhone generates, but is a 37 percent year-over-year increase.

At 13 million subscribers in only ten months, Apple Music is a major player in the streaming music market. That doesn't take away the sting from the overall lower quarterly numbers for investors, but it is at least a small consolation—and something to watch closely in the coming months.

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Comments

JoelS

Sorry, but I think you have it wrong. 13M subscribers for Apple Music is very bad.  Apple is said to have credit card accounts for over 800 million users. With a click, any of those 800 million users should be able to be Apple Music customers.  Only 1.6 percent of that 800 million users have clicked that button and stayed as Apple Music users after the free trial period.  That is worse than terrible, that is abysmal.  iTunes and music used to be the crown jewels of the Apple empire and now iTunes is a steaming mess that nobody can figure out and they can’t convert more than 2% of their user base to their next generation product.  This is a broken company and that is why it has the lowest PE of any tech stock.

Peter Panagiotou

JoelS
what you are failing to mention is that the overwhelming majority of those 800 million customers aren’t paying for any streaming music at all. they just use whichever Free streaming service they want.
Apple now has the second largest streaming company in the world in less than a year.
But i guess those facts don’t fit in to what you are trying to get others to believe.

JoelS

Most of the 800 million users have their credit cards with Apple because they used to buy music on iTunes.  Now they don’t.  iTunes under Steve Jobs was a huge success and saved the music industry from free downloads because the user interface and its quality and features was so good that people were willing to pay for downloads instead of steal them from sharing sites.  If today’s Apple iTunes was nearly as good as the iTunes was in the early days it would have the same effect.  As it is, it is having very little effect and not impacting Apple’s bottom line. They simply are not the same company they used to be. iTunes suffers from the same order of legacy drag today that Microsoft did in the early 00’s.  Unless there is a turn around, Apple will following the same trajectory in the coming years as did Microsoft.  Too bad, it was the world’s greatest company.

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