The redesign and relaunch of Beats Music is one of the most anticipated announcements Apple fans are expecting to hear about next week at WWDC. Apple spent $3 billion on Beats in an effort to take on the likes of Spotify and Pandora, but according to Piper Jaffray analyst Gene Munster, all that effort won’t make Apple a ton of money.
Beats currently has about 300,000 paid subscribers while Spotify has 15 million. According to Munster’s math, even if Apple matched Spotify’s subscriber base the profits will be weak.
“With the $10 per month expected price for the new streaming service, even if Apple were to grow its paying streaming music subscriber base to match Spotify’s 15 million (which we view as highly unlikely), it would add less than 1% to revenue in 2016,” Munster wrote to investors in a note this morning.
The thing is, Apple’s never made a ton of money off selling music. It made its money off selling iPods, Macs and iPhones, all of which have incredible access to the best digital content in the world. Making a kick-ass streaming service isn’t about adding more greenbacks to Apple’s growing cash horde. It’s all about making the overall experience better.
Listening to music is still one of the most popular uses for the iPhone. It may not be a sexy new product to investors, but building a great new music experience with the iPhone’s built-in app, plus exclusives from the hottest artists around, could make the new Beats Music the hottest thing in music since iTunes. And that’s going to sell a lot more iPhones.
