Apple Music's Not Catching Spotify Anytime Soon And That's Not Good

As   Apple Music reaches its first anniversary, the service is now up to 15 million paid subscribers, second only to Spotify’s 30 million. That number may not be as rosy as it seems though, since it may be well below what many in the industry initially expected.

A recent report from Cowen & Co. predicted that U.S. revenue from all streaming services will double by 2021, but Spotify is still expected to hold the subscriber lead during that period and not Apple Music.

One of the reasons why the service can be considered to be underperforming is the fact that iTunes has more than 800 million accounts with credit cards already on file, and all of them had the ability to take advantage of a 90 day free trial of the service when it launched. While it’s true that Apple Music has worked it’s way up to 15 million paid subscribers from an initial 6.5 million, that’s still 1.88% of the potential audience once considered easy to tap.

While there was no official prediction on the number of conversions from iTunes to Apple Music, you can bet that not many in Apple upper management were counting on a figure of less than 2%. It’s difficult enough to get buy-in from consumers who aren’t already your customers, but when you can’t even get your most loyal customers who’ve spent money with you before (and a lot, in some cases) to sign on, you’ve got a problem.

Granted, there are some territories where an additional $9.95 per month (or the currency equivalent of the territory) might be considered a hardship, but the fact of the matter is that there are over 580 million iPhone users worldwide, which is an expensive purchase no matter what part of the world you live. Even using that total, 15 million subscribers still only puts it slightly above a 2.5% conversion mark.

There’s another problem though. According to the report, Apple Music’s monthly churn rate is 6.4%, nearly three times higher than Spotify’s 2.2% monthly churn. Not good.

Still, Apple Music continues to grow, but so do all the other streaming services as well. Plus, with Amazon Prime Music a potential major disrupter in the sector, and Pandora potentially entering the on-demand music space as well, that second place 15 million mark doesn’t look as awesome as the Apple press releases might make it seem.

According to recent reports from Morgan Stanley, Credit Suisse, and the previously cited Cowen & Co., the number of streaming music subscribers is predicted to grow at at an increased pace for the next five years. That’s great news for the music industry in general, but unless there’s a big change in its conversion rate, don’t look to Apple Music to lead the way.