2018 will go down as a big year for music streaming services. Millions of people around the globe are transitioning to digital music as a subscription service, ditching CDs and even the pay-per-download model.
Several of the biggest music streaming companies had initial public offerings this year, including Spotify Technology (NYSE:SPOT) and Tencent Holdings' (NASDAQOTH:TCEHY) recent partial spinoff of Tencent Music Entertainment (NYSE:TME). Here in the U.S., though, an old name reclaimed the top spot this year in the music streaming business.
The biggest at home
For the past couple of years, Apple's (NASDAQ:AAPL) growth strategy has been focused on its subscription services, and Apple Music is a tentpole in that segment. After surpassing 50 million users globally back in the spring, Apple Music just stole the top spot in America from Spotify. Both services have over 20 million paying subscribers in the U.S., according to a report from Digital Music News.
It's a tight race between the two companies, one that will probably continue to unfold over the coming years. At this point, Apple has more momentum in the States, though, getting a boost from cross-selling services alongside devices ranging from the iPhone to Beats headphones to the new HomePod smart speaker. Apple has also been inking deals to offer its music streaming service on other devices, such as its recent agreement with Amazon.com (NASDAQ:AMZN) to bring Apple Music to the Echo smart speaker.
Beyond Apple and Spotify, Amazon itself is also a heavy hitter, though the numbers for its music services are a little harder to pin down. CEO Jeff Bezos said Amazon Prime membership surpassed 100 million worldwide this year, with estimates that the number in the U.S. is also approaching that milestone. Prime subscribers get Prime Music for free, but Amazon also offers Music Unlimited; right now new sign-ups can try the all-you-can-listen-to service for $0.99 a month for the first three months. Amazon doesn't disclose how many of its Prime members avail themselves of Prime Music or Music Unlimited.
Beyond those top three, the field thins out pretty quickly. However, former music-streaming darling Pandora Media is still worth noting, especially after its announcement that it will sell itself to satellite radio operator Sirius XM for $3.5 billion. Though Pandora's total listener count has been declining, it had 6.8 million paying subscribers at the end of the third quarter, compared with just 5.5 million at the end of 2017.
Don't forget the rest of the world
Outside the U.S., two names are worth keeping an eye on. The first is Spotify, which is the global leader in terms of paying subscribers. The Swedish company boasted having 191 million monthly active users at the end of the third quarter, 87 million of whom were paying subscribers. Spotify projects that it will have as many as 206 million monthly active users and up to 96 million paying subscribers by year-end.
That pales in comparison with Tencent Music's 800 million-user base in China, spread across subsidiaries QQ Music, Kugou Music, Kuwo Music, and WeSing. There are only 23 million subscribers across Tencent Music's platform. The company generated most of its $1.7 billion in revenue in 2017 from virtual gifts shared with artists and other live streamers on its platform. Yet even though it's smaller than Spotify when it comes to direct paying customers, Tencent Music is the more profitable enterprise at this point.
And there they are: the most popular music streaming services of 2018. Apple is narrowly beating Spotify in the U.S., while Spotify and Tencent Music are the biggest names overseas. For investors looking to capitalize on the movement, those three names are a good place to start.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Nicholas Rossolillo and his clients own shares of Apple and Tencent Holdings. The Motley Fool owns shares of and recommends Amazon, Apple, Pandora Media, and Tencent Holdings. 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.