Apple’s announcement that it hit 11 million trialists to Apple Music just 5 weeks after launching has divided opinion as to whether the milestone constitutes success or failure. It is probably a bit of both:
- The glass half full perspective: No other streaming service has converted so many consumers so quickly. Although it is not a like-for-like comparison, 5 weeks after launching its premium tier Spotify had less than 100,000 paying subscribers. Apple’s early follower product strategy entails waiting for a sector to be ready for primetime before entering it. Such scale so quickly suggests Apple has timed its entry well here.
- The glass half empty perspective: It is a very different market now than in 2008 when Spotify launched. Streaming music listening on mobiles is widespread and awareness of subscriptions is high. Also Apple hasn’t actually got anyone to part with cash yet. 11 million trialists represents about 10% of the Apple customers that bought music from iTunes in 2014, so the majority of those consumers have not adopted yet. Also Apple has a well-earned reputation for getting the majority of its iOS users to adopt iOS updates quickly. So the vast majority of iOS 8.4 users have not yet adopted.
Just How Many Subscribers Will 11 Million Trialists Turn Into?
The biggest issue with the milestone is that we are talking about trialists not subscribers. So these numbers are an early indicator of likely performance rather than performance metrics in their own right. What Apple understands keenly – for all its anti-freemium vitriol – is that prolonged free, and near free, access is key to driving subscription. Just ask Spotify. So Apple’s conversion rates should be reasonably high, especially considering subscribers are ‘auto opted in’ to payment (and it’s not exactly easy to opt out). That billing mechanism should ensure more than half of the 11 million make at least one payment. About half of those will cancel when they realise they are paying, which will leave in the region of 3 million long term paying subscribers from that base, perhaps a few more.
The clever bit for Apple is that the total number of reportable subscribers, the ‘ever subscriber’ number, will be around 6 million because of those extra 3 million that accidentally paid for 1 month. And because Apple Music should be growing at pace over the next 12 months, we’ll never even see the impact of that 3 million being wiped off the subscriber count, with them quickly replaced by new additions.
Where Will Apple Be By Year End?
The 100 million paying subscribers by end of 2015 number is not going to happen though. And Apple has been smart enough to ensure this number has plausible deniability. Here’s where Apple looks like its tracking to for the end of 2015:
— Continue reading Mark Mulligan's Music Industry Blog here.