It's been about six months since Apple (NASDAQ:AAPL) provided investors with an update on Apple Music. In December, the company said that its music-streaming service had grown to 20 million subscribers. That figure has now jumped to 27 million, a metric that Apple shared during its WWDC 2017 opening keynote yesterday.

Starting at $10 per month for individual users ($15 per month for families), that suggests that Apple Music is enjoying a $3.25 billion run rate.

Apple Music on iPhone and iPad

Apple Music is the second-largest music streaming platform. Image source: Apple.

We're No. 2! We're No. 2!

Spotify continues to be the industry leader for paid music subscriptions, which totaled 50 million at last count (March 2017). That means Apple Music's subscriber base is roughly half of what Spotify's was a few months ago. In terms of relative size, that proportion has held fairly constant as both Apple Music and Spotify continue growing.

Chart comparing Apple Music and Spotify subscribers

Data sources: Apple and Spotify. Chart by author.

Neither Apple or Spotify provide regular updates on their subscriber metrics, instead irregularly disclosing various milestones. The good news is that Apple Music and Spotify combined are pushing the industry toward a paid model. Record labels have long loathed free, ad-supported models (though Spotify still offers a free tier while Apple only offers a paid service). The industry hit the important milestone of 100 million paid subscribers late last year, and the two largest services now command nearly 80 million users combined. That bodes well for the music industry's economics.

Developers, developers, developers

Apple is also making an important competitive step: releasing a MusicKit application programming interface (API) that will allow third-party developers to integrate Apple Music in various ways. Developers will be able to play Apple Music within their apps. Apple is also adding new social elements, like the ability to share what you're listening to but with privacy controls so you can hide your guilty pleasures.

It's not a coincidence that Spotify has long offered APIs and software development kits (SDKs) that enable third-party integrations for its service, which also allow hardware manufacturers to integrate their devices with Spotify. (Spotify is reportedly also interested in building its own hardware.)

Enabling third-party integrations is a big step in the right direction.

Apple Music will be key to Apple's services target

A $3.25 billion run rate represents over 10% of Apple's trailing-12-month revenue base for services, which have brought in $26.5 billion over the past year. That's not to say that Apple Music is carrying that much weight quite yet, since a run rate is simply an annualized figure based on a single point in time. But the point is that Apple Music is one of several critical pieces in growing the services business as a whole, which Apple hopes can hit $50 billion by 2020.

Apple Music's growing contribution to the company's services ambitions is hugely important to building recurring revenue sources, which will in turn help valuation both because of its recurring nature and because it's a high-margin business.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.