Sorry, Apple, 6.5 Million Music Subs Isn't Enough

The iEverything company has drawn a crowd of paying subscribers to its premium music service, but it's too soon to call it a success.

Rick Munarriz
Rick Munarriz
Oct 24, 2015 at 7:00AM
Technology and Telecom

There may be millions of people paying Apple (NASDAQ:AAPL) for its nascent streaming service, but it's not enough. The consumer-electronics leader revealed this week that there are 6.5 million subscribers paying at least $10 a month for Apple Music. Speaking at the WSJD conference, CEO Tim Cook also announced that another 8.3 million music fans are part of the service's free trial.  

That may seem like an impressive tally. We're talking about nearly 15 million Apple Music users in a little less than four months. Pandora (NYSE:P) has been toiling in this niche for years, and it has fewer paying subscribers. Market darling Spotify has just 20 million paying subscribers -- as of June -- and Apple is already nearly a third of the way there.

That makes it seem as if Apple Music has hit the ground running, but let's also consider that Pandora has 78.1 million active listeners. Yes, most of them are freeloaders. Pandora didn't spell out how many of them are paying for the premium ad-free offering, but $56.9 million generated in subscription revenue for the entire quarter implies that it's less than what Apple stands to clear in a single month if its 6.5 million paying customers stick around.

That's certainly not a given. Apple Music rolled out at the end of June, and it's giving everyone that signs up three months of complimentary access. It then starts to automatically charge the accounts with the payment information that they entered earlier in the summer. These 6.5 million streaming music buffs just got hit with the first charge earlier this month. It wouldn't be a surprise if many of them had forgotten about this, and will move to cancel once they see that Apple's eating into their statements. 

Many will stick around, obviously. Apple Music is no slouch. However, we still can't place too much weight on that 6.5 million. 

There's also the problematic issue of 8.3 million accounts in the free-trial funnel. These are people that signed up for the service after mid-July, but it's not the same flurry of activity that we saw when the service launched. 

More people are coming than going. Apple's last update was in early August when it mentioned that its platform had 11 million users. We've grown to nearly 15 million in a little more than two months. However, that's still less than 10% of the more than 153 million active listeners on Spotify and Pandora combined.

Apple Music will get better. It will soon launch an app for Android devices. Naturally, it won't have the same kind of appeal that it has on iOS gadgetry, where it can shoehorn its way into the interface, but trying to attract fans from the away team's stands can only be incremental. However, 6.5 million paying customers after they have just been slapped with the first automatic payment isn't enough. Let's see where the tally of premium Apple Music fans is after they've absorbed the first credit card statement or two.   

Apple Music isn't a failure. The jury's still out on whether it's actually a success.