Apple slices into Spotify’s lead in the US music market

Anna Nicolaou 
A man checks the Apple Music streaming site using his Apple Inc. iPhone 6s.
Chris Ratcliffe | Bloomberg | Getty Images

Spotify’s lead over Apple’s music-streaming service in the US is narrowing, denting the air of invincibility around the recently floated pioneer.

While Spotify still holds a commanding lead globally, Apple’s faster growth rate in the world’s largest music market reflects its ability to push its services to owners of its devices, such as the iPhone.

The rising relevance of Apple Music in the streaming market has been underscored in the past two weeks with the release of Scorpion by Drake, which is expected to be the biggest album of the year. In the first 24 hours of its release, it was streamed on Apple Music 170m times, while Spotify recorded just 130m streams, despite having three times as many total users.

“You literally couldn’t navigate around Drake on Spotify,” said one record label executive. “But Apple was really able to drive engagement”.

Spotify, Apple and other streaming services do not publicly break down their subscriber counts by country, but they do report the figures to music distributors and record companies.

As of last week, Apple had between 21m and 21.5m US subscribers, while Spotify had 22m to 22.5m, according to industry executives. A year ago, Spotify had about 17m US subscribers to Apple’s 13m, these people say.

Music executives expect Apple to match Spotify in the US by next month. Apple should end the year with about 27m US subscribers to Spotify’s 24m, according to internal forecasts viewed by the FT. Apple’s music service has also been growing faster than Spotify in the UK and Canada, countries that were heavy adopters of the iTunes store, these executives said.

“Spotify has always targeted music lovers, who tend to be a bit younger and were early adopters of streaming,” said Mark Mulligan, analyst at Midia Research. “A lot of that base has been soaked up now, whereas Apple has a much wider customer base. They can get those more mainstream people very easily because [Apple Music] is already in their phone, and they already have their credit card info.”

Globally, Spotify remains the leader in digital music by a wide margin. The company, which also offers a free service, said it had signed up 75m paying customers to the end of March, and expected that to increase to nearly 100m by the end of the year.

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Apple most recently reported it had 50m subscribers as of May, although this includes people who signed up for a free trial, inflating the number. Amazon has become a third competitor in the race: the company said in April it had “tens of millions” of subscribers for its music streaming service, but declined to give an exact figure.

Spotify faces greater scrutiny of its subscriber numbers as a public company — investors care about user growth because the $30bn company is still lossmaking.

It has been attempting to stoke subscriber growth, and in April unveiled a bundled subscription package with Hulu, the video streaming site that rivals Netflix. Spotify was also offering a three-month trial of its premium service for 99 cents in some markets, and revamped its free service to help attract new customers to its app.

It is set to report its latest global subscriber numbers on July 26, along with quarterly earnings.

Daniel Ek, Spotify’s cofounder and chief executive, has brushed off concerns about Apple’s threat. “We don’t see any meaningful impact of competition,” he said on a call with investors in May. “We don’t think that this is a winner takes all market.”

Apple and Spotify declined to comment.

Additional reporting by Tim Bradshaw in Los Angeles