Apple Music has just reached the milestone of 40 million paying subscribers, but how fast will it grow in terms of the revenues it’s bringing in to Apple’s overall business?
One analyst quoted in the Wall Street Journal has made a prediction.
“Ben Schachter of Macquarie Capital estimates that Apple Music will average 40% annual growth over the next three years, making it the fastest-growing part of the company’s services segment,” explained the piece, while adding a caveat.
“The rub, of course, is that music streaming isn’t a terribly profitable business, due mostly to the royalties streamers must pay to labels and artists. Mr. Schachter estimates that Apple Music commands a gross margin of around 15%. That is actually lower than the 24% that Spotify projects for this year.”
While we’re on that particular comparison, let’s go back to the prediction of 40% average annual growth for Apple Music.
That’s nearly a direct match for the 38.6% growth of Spotify’s revenues in 2017, while that company’s earnings guidance for the first quarter of 2018 estimates between 22% and 27% year-on-year growth.