Spotify now dominates the market with its number of subscribers tripling since December 2012, but Apple has the opportunity to take away Spotify's share, particularly in less developed subscription music markets, according to analysts with IHS Technology.
If 10% of iPhone users sign up for Apple's streaming service, the company would automatically rival Spotify as the world's largest on-demand subscription service, IHS analysts said. Spotify has more than 75 million users, with roughly 27%, or 20 million users, paying for their digital subscription service. In its last quarter alone, Apple had more than 61 million unit sales of iPhones and has shipped more than 1 billion iOS devices, according to Phil Schiller, Apple's senior vice president of worldwide marketing.
But where Apple really has the chance to dominate is in areas where less than 5% of the population uses on-demand subscription services, according to IHS, including in the United States and Japan, where Apple reported net sales of $21.3 billion and $3.5 billion, respectively, in its most recent earnings statement. And even though users are not paying for music streaming in these areas yet, IHS analysts say they account for more than 75% of the global consumer and advertising revenue from music, giving Apple plenty of room to profit.
Spotify costs $9.99 per month for its premium package, which includes unrestricted streaming, no advertisements and downloadable music that users can listen to even when they are offline. The company offers a family plan that allows users to add people to their account for an additional $4.99 per month per user.
Apple Music will also cost $9.99 a month and will give users access to music, a 24-hour radio station and their favorite artists through a "connect" system. Apple's family plan will cost $14.99 per month for up to six people, lower than what it would cost to have six people sharing a Spotify account.
If just 1% of the iPhone installed base paid for Apple Music, Apple would generate 10% of the global digital album and single sales in 2016, according to IHS. That is more than $400 million dollars coming from less than 1% of its users. Spotify reported $1.3 billion in revenue for 2014, according to The New York Times.