While it might not be the fastest growing of Apple's business units (that honor belongs to the Wearables, Home, and Accessories division), Apple will probably meet its target of $50 billion in revenue for its Services group. And the social distancing that many of us are following to stem the tide of the COVID-19 outbreak can only help. That's because this unit includes several services that iOS users can access to pass the time away including the App Store, Apple Arcade, Apple News+, Apple TV+ and Apple Music. Also part of this business segment is Apple Pay, iCloud, and AppleCare.
Spotify, Apple, and Amazon were the top three music streamers worldwide last year
With over 1.5 billion active Apple devices worldwide, all of these recurring subscription services helped the Services unit generate revenue of $12.72 billion during the fiscal first quarter running from October through December. That works out to an annual rate of more than $50 billion. Of the recurring subscription services Apple offers, Apple Music is available to both iOS and Android users via an app listed in both the App Store and the Google Play Store.
Apple Music is the second most popular music streamer in the world according to data compiled by Counterpoint Research. For all of calendar 2019, Apple's music streamer captured 24% of total paid revenue in the industry worldwide. Apple Music also accounted for 19% of the number of subscribers who signed up for a music streaming service globally. The total number of Apple Music subscribers on the planet grew by 36% year-over-year. That put Apple Music second to Spotify; the latter accounted for a leading 31% of revenue worldwide and 35% of subscribers.
After Spotify and Apple, Amazon was third with a 15% share of global streaming subscribers. That was up 50% from the 10% slice of the pie that Amazon Music garnered last year. Tencent Music was next with 11% and YouTube music rounded out the top five with 6%. The remaining names combined to take a 14% share in the music streaming business in 2019. Counterpoint research analyst Abhilash Kumar, talking about the top three music streamers, said, "Spotify maintained its top spot with the help of promotional activities like free Spotify Premium for three months, price cuts, customized campaigns and a focus on exclusive content. Tech giants like Amazon, Apple, Google have started focusing on music streaming and have sufficient cash at their disposal to give stiff competition to Spotify. Apple Music is making improvements in its app like the introduction of night mode, curated playlists to target a group, etc. Similarly, Amazon Music has been trying lossless music and is creating its own niche where it competes with Tidal."
For all of 2019, Counterpoint said that subscriptions to streaming audio services rose 32% on an annual basis to reach 358 million subscribers; the number of monthly active users rose 23% during 2019. Helping to drive the growth was bundled deals offered to customers by some wireless providers and promotional price cuts in emerging markets. For this year, the research firm forecasts another 25% gain to 450 million global subscribers in 2020.
Counterpoint's Kumar pointed out that some of the streamers are using a two-step approach to sign up subscribers. Using advertising, these streamers promote free trial periods, or in the case of Spotify, free ad-supported tiers of service. The goal is to convert these people to a paid subscription. After all, 80% of music streaming revenue last year came from paying subscribers. The remaining 20% came from ads and partnership deals with telecom firms and brands. Thus, the analyst says that signing up subscribers is the most important task for music streamers. He also notes that thanks to the COVID-19 outbreak, consumers are switching from listening to music streams to streaming television and radio news feeds.