“Apple, for example, charges apps a percentage of revenue for subscriptions processed through the App Store. Apple Music, meanwhile, will always deliver Apple 100% of the subscription revenue that it receives from subscribers (sans record fees and all that kind of stuff, of course). Apple, too, has a direct integration with its iOS devices and also a huge amount of brand recognition even though Spotify is a massive service.”
Yes, but Apple has an even bigger advantage: they don’t need to make a profit from Apple Music. They make their money selling hardware, and Spotify only has their music streaming activity. This isn’t to say that Apple will lose money on Apple Music, or continue to do so (it’s possible that Apple Music is not yet profitable), but that Apple doesn’t have to worry about its investors getting antsy about profit or loss in what is a small part of their activity. Apple is clearly betting on content being a major profit center, with their focus on creating new video content, but they can well afford to wait this out.
Apple is playing the long game; Spotify only has one game they can play, and that’s profit and loss.
Kirk,
Listen to Apple’s quarterly earnings conference calls, the discussion around Apple services which includes Apple Music is always mentioned in the various financial/tech shows in America. Wall Street seems to always focus on Apple’s perecentage of profit that is in the Services part of the pie chart and they want to see it expand to a certain number by a certain year because many investors fear we are near peak smartphone territory and world sales will begin to decline.
If you don’t believe Apple is under pressure to grow Apple Music, you are missing the investor story.
Also I’m surprised you missed the news last week that Spotify was looking to hire people in the pursuit of a Spotify hardware product, perhaps it is a pipedream but it is interesting nonetheless:
https://www.theverge.com/2018/2/20/17031396/spotify-job-listing-hardware-music-streaming
Services are mostly the App Store and iTunes Stoore, plus iCloud and Apple Music. They’re in no hurry with Apple Music because of all the other services. Note that they don’t itemize; I’d conjecture that Apple Music isn’t making a profit yet.
Kirk,
Listen to Apple’s quarterly earnings conference calls, the discussion around Apple services which includes Apple Music is always mentioned in the various financial/tech shows in America. Wall Street seems to always focus on Apple’s perecentage of profit that is in the Services part of the pie chart and they want to see it expand to a certain number by a certain year because many investors fear we are near peak smartphone territory and world sales will begin to decline.
If you don’t believe Apple is under pressure to grow Apple Music, you are missing the investor story.
Also I’m surprised you missed the news last week that Spotify was looking to hire people in the pursuit of a Spotify hardware product, perhaps it is a pipedream but it is interesting nonetheless:
https://www.theverge.com/2018/2/20/17031396/spotify-job-listing-hardware-music-streaming
Services are mostly the App Store and iTunes Stoore, plus iCloud and Apple Music. They’re in no hurry with Apple Music because of all the other services. Note that they don’t itemize; I’d conjecture that Apple Music isn’t making a profit yet.
“percentage” typo correction.
“percentage” typo correction.