It was pure coincidence that Deezer called off its planned IPO the same night that Apple announced its latest set of barnstorming financial results, but the link between the two stories is important – and perhaps troubling – for the music industry.
At a time when the economics of streaming music are under more scrutiny than ever before, last night provided a stark reminder of the challenges for the pureplay companies in this space.
The scale of Apple’s figures is now familiar: the company reported revenues of $51.5bn and a net profit of $11.1bn for the third quarter of 2015 – its fiscal fourth quarter – as it sold 48m iPhones, 9.9m iPads and 5.7 Macs. The iPhone sales were boosted by the launch last quarter of the new iPhone 6s and 6s Plus handsets, which sold 13m in their first weekend alone.
For Apple’s full-year 2014, the company generated revenues of $234bn, up 28% year-on-year. “To put that into some context, our growth in one year was greater than the full year revenue of almost 90% of the companies in the Fortune 500,” as CEO Tim Cook explained it to investors.
In its last four quarters, Apple has sold 231m iPhones, 55m iPads and 21m Macs, and it ended September with $205.7bn in cash and marketable securities.
This is the business that backs Apple Music, while rivals like Deezer and Spotify are reliant on VC funding to soak up their losses and expansion costs as they plot their paths towards IPOs and (hopefully) profitability. Or to make that comparison more starkly: Deezer had hoped to raise $343m by going public, but Apple made that amount every 15 hours last quarter.
Now, Apple can now play the long game, improving Apple Music steadily while outbidding rivals for exclusives using the corporate equivalent of spare change found down the back of its sofa, and watching Deezer and Spotify navigate increasingly-rocky waves in the investment world, whether they are trying to go public soon or raise more VC cash to extend their runway until more favourable times.
For a music industry keen to see the kind of long-term competition in the streaming sector that the downloads market never had, there is plenty to ponder here.
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