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This article first appeared in The Edge Financial Daily, on January 13, 2016.

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APPLE’S streaming music service now has more than 10 million subscribers, according to a report in the Financial Times. That sounds like a lot, but what it really indicates is that Apple may have lost its way.

Apple Music debuted at the end of June 2015. That means it passed the 10 million mark in less than six months. Spotify, its main rival, took six years to do it.

Of the 10 million Apple subscribers, 3.5 million apparently have been added since mid-October, when Apple announced it had 6.5 million subscribers paying at least US$10 (RM44.20) per month (there is also a more expensive “family subscription”).

Great tempo, right? Well, maybe not.

The application was pushed to all iPhone, iPad and iPod Touch users as part of an operating system update. It was easy to activate the three-month free trial, after which Apple would start charging the user’s account. Someone with an Apple ID (which is necessary to download apps) would not even need to enter payment details.

At the end of September 2015, according to Consumer Intelligence Research Partners, 101 million iPhones were in use in the United States alone. There are hundreds of millions of other iOS devices in other countries, and seven new iPhones are sold every second, based on data for the 2015 financial year. An overwhelming majority of these devices have Apple Music installed — Apple prides itself that its users keep their operating system up to date.

Given the huge installed base and the ease of subscribing, 10 million subscribers seems underwhelming.

By contrast, a user needs to make a conscious decision to download Spotify. Even so, the Swedish-designed streaming app, which Apple Music set out to displace as market leader, appears to be growing fast. Spotify had 15 million paying subscribers at the end of 2014 and 20 million in early June.

Dante D’Orazio at The Verge reported that Spotify experienced “the fastest subscriber growth” in its history in the past six months, which means it added more than five million while Apple Music was active. That is impressive, given that it was not growing from scratch and was not pre-installed.

To be sure, Spotify has suffered from the competition — but not enough to cause serious worry. Here is how Spotify’s downloads on Apple’s App Store have evolved since Apple Music began.

In the Google Play store, where Android users get their apps, Spotify’s performance has not changed since Nov 10, when Apple Music became available on the platform. Apple Music has not been doing well on Android, where it is not preinstalled. According to App Annie, it has languished recently around 70th place by number of downloads, while Spotify is consistently near the top (it is ranked 12th in the US now).

In Apple’s US App Store, Spotify is the top-grossing app in the music category and the fourth overall.

So it appears that even Apple’s user base often prefers the market leader to the upstart “native” offering. They have good reasons for that choice. One is bugs — Apple Music was rushed to market with a few frustrating ones that it has struggled to fix. The nastiest was one that made downloaded songs in a user’s iTunes library unavailable.

Apple Music could have trashed Sportify on iPhones just as quickly, thanks to its platform advantage, but failed to do so because the app was not demonstrably better.

Sure, Apple Music has some exclusives. That, however, is not enough to induce most users to switch or to shell out US$10 for a second streaming music subscription.
I tried Apple Music and remained loyal to my streaming service — Paris-based Deezer, which has a much more satisfying selection of non-English language music.

Of course, even with 10 million users, Apple Music will provide the company with US$1.2 billion in annual revenue. That is dwarfed, however, by Apple’s projected revenue of US$239 billion for 2016, but it is not good enough for a company with such a huge cult following and a near-captive audience of hundreds of millions of people.

Underwhelming product launches have become acceptable at Apple. I have little doubt that the company is not breaking out Apple Watch numbers to avoid disappointment, and it is likely that Apple Music numbers will not be broken out in the next quarterly report, either. Apple’s enormous revenue and profit have silenced critics for years, creating the impression that past successes and geographical expansion could carry the company forward forever.

That is an illusion. Apple’s management needs to pay special attention to the pace and quality of innovation before the numbers reflect what appears to be a slump in ideas and design. — Bloomberg View

Leonid Bershidsky is a Bloomberg View columnist.

 

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