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Apple Music hits 11 million subscribers: Why Spotify isn't worried

Apple Music breaks another record, but if investors were waiting for an industry upheaval, it hasn't happened. Spotify is still dominant and multiple business models have had success in the streaming music industry. 

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Eric Risberg/AP/File
A man walks past the Apple logo at a product display in San Francisco, Sept. 9, 2015. Apple Music recently announced it has over 11 million paid subscribers.

On Friday, officials announced Apple Music reached an all-time high for paying subscribers.

"The Talk Show," a podcast by John Gruber, aired an exclusive interview with two Apple senior vice presidents, Craig Federighi and Eddy Cue. Among many details of Apple’s business, the duo announced that Apple Music had “just passed over 11 million Apple Music subscribers.”

The 11 million subscriber mark is in line with market expectations after the Financial Times broke the story of Apple Music reaching 10 million subscribers in early January. Still, the new high demonstrates rapid growth for the young music streaming service and an industry that is in flux.

“It’s good news that Apple is making streaming work, but it is also going to accelerate the decline of downloads,” Media analyst Mark Mulligan told the Financial Times. He added that at Apple Music's current rate, it had “the potential to be the leading music subscription service sometime in 2017.”

For now, Spotify remains a dominating force in the music streaming industry. In June, Spotify breezed past the 20 million subscriber mark. 

What the raw numbers don’t reveal is Apple's key distinction: speed. Apple Music reached an impressive level of market share much faster than other services, as The Christian Science Monitor reported in October. Spotify launched in the US in July 2011 and reached 10 million paid subscribers in May 2014, almost three years later. Apple Music launched in June 2015 and gained 10 million paid subscribers in seven months. 

The business models of the two streaming services differ. Spotify has a free tier of users that it tries to attract to paying for the service; as a result, its user base of 20 million paying subscribers is supplemented by 75 million free users, according to The Verge.

Apple Music started with a three-month trial, which will soon end for most users, and only offers a paid service. For many, Apple Music may also be a convenience decision, as Mr. Federighi and Mr. Cue also announced Apple has 1 billion devices in use.

Regardless of model, both companies, and others in the industry, are competing for a massive market.

In the first half of 2015, “music downloads and streaming services accounted for more than 70 percent of music industry revenues in the United States,” according to data from Statista. Data from the Recording Industry Association of America shows that in 2013, online music streaming services generated $1.4 billion in revenue and that number is growing every year.

The potential for disruption and reshuffling in the industry is also high.

Pandora, the online radio behemoth, is holding talks about selling itself, reports The New York Times. The company ended the year with 81.1 million users.

In an investor note on Friday, Edison Investment Research predicted that Spotify would be the likely buyer if Pandora decides to sell.

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