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.
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
3 responses to “There’s no money for Apple in music streaming, but that’s OK”
I still buy CDs — don’t like the sound of MP3s — but I’d really like the opportunity to listen to my complete collection anywhere I go (so long as there’s that inter tube-y thing). iTunes Match would be pretty good, but I have more than double its maximum of 25,000 songs. I would gladly pay extra to get access to my full collection, and I’d pay a surcharge to listen to lossless versions instead of MP3s.
A lot of people think they have over the 25,000 song limit, but really they don’t.
If iTunes has that song available to purchase then that song doesn’t count toward your 25,000.