One month after unveiling its new streaming music service, Apple has locked in 11 million trial members, company executives tell USA TODAY.
"We're thrilled with the numbers so far," says Eddy Cue, Apple's senior vice president of Internet software and services, adding that of that sum 2 million have opted for the more lucrative family plan at $14.99 a month for up to six people.
Apple Music, which launched June 30, costs $9.99 a month for individual access to 30 million songs as well as human-curation playlists and a live radio station. There is an initial free-trial period of three months. Assuming all the trial memberships are converted into paying customers come October, Apple would already boast half the paid memberships of reigning streaming champ Spotify, which launched nearly a decade ago.
July also brought a fiscal high-water mark for the company's App Store, which did a record $1.7 billion in transactions, "with particular momentum in China," says Cue. That brings the total amount paid to app developers to $33 billion, up from $25 billion at the end of 2014.
Those bright numbers stand in contrast to the recent stumble of Apple's normally high-flying stock (AAPL), which has fallen some 14% off a $134.54 high on April 28, erasing nearly $115 billion in value. Investors are concerned that Apple's lucrative smartphone business in the U.S. is reaching a saturation point, while the promise of a booming China market could be impacted by growing handset competition in Asia.
The bulk of the $50 billion in revenue Apple posted at the end of the last quarter comes from hardware sales, namely iPhone and iPad. While revenues from app remain small by comparison, clearly building that business could provide the company with steady profits as consumers increasingly live their lives through their multi-function smartphones, using them for everything from entertainment to work.
Music downloads, which built the iTunes store into a financial powerhouse, still account for two-thirds of music revenue, but streaming is gaining momentum among younger consumers whose general preferences, whether related to cars or music, skew more towards sharing and renting than outright ownership. While many free, ad-supported option exists from players such as Pandora, Rhapsody and Google's YouTube, consumers have shown they're willing to pay for music if it comes with upsides such as higher music fidelity (Tidal currently offers the best option on this front) to unique features (such as Apple Music's throwback to radio, Beats 1).
Reports in Digital Music News and other outlets that monitor streaming music have indicated Apple's intent to dominate streaming music - with a goal of 100 million subscribers, or double the total of all current services combined - despite its late entry into the field. This fall, Apple will unveil Apple Music for Android users in beta, part of CEO Tim Cook's pledge to be platform agnostic with the service.
By and large, Apple Music has gotten favorable reviews from the tech-set, with most of the criticisms anchored not to content but functionality. Some users have reported seeing duplicate playlists and mislabeled tracks as they set up the service. Cue says "we're aware that some users have experienced some issues, and we hate letting them down, but we're releasing updates as fast as we can to address those issues."
Apple is rolling out a broad marketing campaign to promote Apple Music over the coming months as the trial period comes to an end, featuring billboard, TV and radio ads that emphasize the service's ability to connect users with not just establish artist catalogs but also emerging artists. For example, Zane Lowe, the London-based deejay for the service's live-radio station, Beats 1, has been credited with helping break social media sensation Halsey's single New Americana last month.
"What we're about it's just tech and a utility, we are all about entertainment, being fluid," says longtime record producer Jimmy Iovine, who became an Apple employee when the Cupertino company purchased Beats Electronics, founded by Iovine and rapper Dr. Dre, for $3 billion last year.
While describing himself as "pleasantly shocked" at Apple Music's rapid uptake (by most accounts, Beats Music never broke beyond a few hundred thousand paying users, whose subscriptions will port over to Apple Music), Iovine says the new service still faces challenges.
"For many people outside of the U.S. (Apple Music launched in 100 countries), you still have to explain what it is and how it works," he says. "Beyond that, there's still the issue of winning over millennials, who never pay for music, by showing them you're offering something that will improve their lives. And finally, there are people out there who i think understand its value, but we still have to go out and get them."
That said, he's convinced the company can leverage its considerable size and clout to create a paradigm shift in music consumption akin to the one Steve Jobs started with iTunes back in 2003.
"We think we have hit a nerve," says Iovine. "This isn't just about providing access to music, this is about building a community. From the artist community side, I'm hearing a sign of relief, that now finally they have tools they can use to access their fans. To Apple's credit, they move like lightning. You get what you give."