Is Apple Music really about to pass Spotify? The data doesn't back that up.

1 year ago by Jeremy Bloom in Facts, News

Sunday night, The Wall Street Journal reported that Apple Music is about to surpass Spotify as the number one streaming service - at least in the US. Every major media outlet jumpedon the story. But is that really true? We take a dive into the data and see if the numbers back them up.

The WSJ report has several caveats attached to it:

  • This is only for the US; globally, Spotify ($SPOTIFY) knocks the iSocks off Apple ($NASDAQ:AAPL), and that's not likely to change any time soon.
  • Apple Music is bundled with iPhones and Macs, so Apple sees millions of "Free three-month trial" subscribers. It's unclear how many of them end up being actual customers once that trial ends. Since Spotify offers its customers an ad-supported free tier with NO end date, their numbers may be more stable.
  • The Journal claims that Apple Music has been adding subscribers faster than Spotify. Here's their wording, though: "...a monthly growth rate of 5% versus 2%—according to people in the record business familiar with figures reported by the two services." Who are these people? What is their agenda?
  • The Journal further reports: "Assuming that clip continues, Apple will overtake Spotify in the world’s biggest music market this summer." And we all know what happens when we assume that trends will continue unchanged (ask all the folks who bought Bitcoin at $17,000 because it had nowhere to go but up, up, up).

For you and me, it's an interesting question... but if you're an investor planning on pumping tens of millions of dollars into Spotify's forthcoming Initial Public Offering, that question is a lot more significant. And the reporting is a lot more worrisome. That sort of annoymous insider sourcing may cut it if you're reporting on leaks from the House Intelligence Committee, but in the business world, people like numbers they can back up.

With that in mind, here's a rundown of the actual data we have on Spotify here at Thinknum:

One useful metric is job postings - a company that's planning for a big push will be hiring, and one that's got an IPO on the way might load up on sales staff to burnish its numbers. That doesn't seem to be happening:

How about company outlook? At Thinknum we aggregate and provide a data trail from company ratings on Glassdoor, which can provide a really interesting look at how insiders view a company, its CEO, and its prospects. There are more than 180 data points over the past couple of years, and while they tell a very positive picture, there is room for concern.

The last few months of ratings have been overwhelmingly 4-star and 5-star ratings, with just a few downers in the mix:

Spotify's company ratings on Glassdoor

But while Spotify's numbers have been overall very high, they've also been slipping over the past year:

  • How employees view their own prospects for career advancement within the company:

  • Whether they would recommend the company to friends (and presumably to investors as well):

  • And how they feel about Spotify's overall business outlook:

Why are insiders less sanguine? The data doesn't tell us that. So let's take a look at some of the other solid numbers we do know.

How about the assertion that Spotify's US growth is just 2 percent, while Apple's is 5%? Are those numbers even reasonable?

For starters, there's this:

And last summer, Statista put together a global-growth graphic showing Apple starting late and continuing to fall behind:

Statista chart on Spotify vs Apple Music growth

And for total users:

  • Spotify says it has140 million customers worldwide, with 70 million of them paying.
  • Apple has grown from 30 million subscribers last September to 36 million now.
  • Neither company breaks down its US numbers in publically available data. So we're on our own as far as the math is concerned.

Tech folks are excited about the launch of Apple's feature-laden (and pricey) HomePod, which will also feed a stream of new Apple Music subscribers. But nobody knows yet how many (or if there will be any uptic at all - it's quite possible that the high-end buyers of the $349 smart speaker might be the same folks who have already laid out $99 for Apple Music).

UPDATE: Billboard has some numbers from their own investigation:

  • Like the WSJ, Billboard notes a 2% US growth rate for Spotify - except when the streaming service runs promotional specials, which boosts growth to 7%. I wonder if the WSJ took that into account?
  • Billboard's sources indicate 19 million paid US subscribers at the end of 2017, up 5.2 million over the entire year, which sure sounds like better than 2% growth (that's more like 37% year over year).
  • Likewise, their sources say Apple Music hit 16 million, up 6 million on the year (up 60 percent year over year, but is that sustainable?).
  • But Spotify's TOTAL US subscribers, including unpaid ad-supported memberships, topped out late last year at in excess of 45 million. Apple doesn't have a free membership, just the one tier.

So did the Wall Street Journal cherry-pick a few good numbers? We don't even know what they're based on, other than insider leaks (from people who may or may not have an agenda). 

There is one other aspect to the story: Spotify is going for its Initial Public Offering later this year in a decidedly unconventional way. They're bypassing the big investment bank underwriters that have traditionally packaged IPOs (and reaped huge profits off them) and instead are putting it out in a decidedly cut-rate "direct listing" package that has Wall Streeters upset. The WSJ estimates it could cost the firms a $70 million payday.

Could some of these "insiders" be leaking bad news about Spotify/excellent news about Apple to monkey-wrench the IPO?  Stranger things have been known to happen. Institutional investors are still spooked on new tech offerings, and it wouldn't take much to set them fleeing.

Let's give the last word to Billboard: 

In the meantime, any word about Spotify’s revenue picture leaves Wall Street to scrutinize if it can still pull off its long-expected public offering successfully. With some putting the company’s worth at about $19 billion, the health of the entire music industry, not just Spotify, is riding on whether this will happen this year. If Spotify, as the pipeline, is successful in going public, then industry executives will be left to wonder how much the companies who actually own the copyrights are worth.

Jeremy Bloom

When Jeremy Bloom isn't writing about energy, the environment, or the amazing strangeness of modern life, you can find him drinking really good single malt whisky...

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