Apple (NASDAQ:AAPL) may not have shared how many Apple Music subscribers there are during last week's earnings release, but the company has now confirmed to The Wall Street Journal that its global subscriber base has hit 36 million. That's up from 30 million in September, the last official update provided by Apple Music chief Jimmy Iovine.
By way of comparison, market leader Spotify announced a month ago that it had hit 70 million paid subscribers. Ever since launching in 2015, Apple Music has maintained a fairly steady proportion compared to Spotify, with just about half as many paid subscribers at any given time.
Hello 70 million subscribers 👏— Spotify (@Spotify) January 4, 2018
The good news for Apple
While Apple Music still lags Spotify in terms of paid subscribers, there is a silver lining: Apple Music is growing faster within the U.S. market than Spotify, and could overtake Spotify this summer based on current trajectories, according to the report. The U.S. is the largest music streaming market in the world. There were an estimated 30.4 million total paid subscriptions in the U.S. as of mid-2017, according to the Recording Industry Association of America (RIAA).
Apple enjoys strong positions in developed markets, including the U.S., so it seems the company has been successful in winning many of those users over to its own music streaming service. Neither company provides detailed geographic breakdowns of their respective subscriber bases.
Another music-related market concentrated in the U.S.
The subscriber figures also have important implications for the growing smart speaker market. The U.S. also happens to be the biggest smart speaker market in the world, expected to command 38 million in unit volumes this year out of 56 million units globally, according to estimates from market researcher Canalys.
Apple launches its HomePod on Friday, which will only support Apple Music. Spotify has integrated with many smart speakers, notably including Amazon.com's Echo family that currently leads the smart speaker market. While I don't think HomePod looks very competitive at $350 with a limited feature set, to the extent that Apple can raise switching costs for its music streaming service, it has a more compelling cross-sell for Apple Music subscribers.
Growing Apple Music's domestic subscriber base could be a sort of Trojan Horse into the smart speaker market. Now what Apple needs to do is grow its smart speaker portfolio with more affordable products that span a more diverse set of use cases.
Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.