Apple Music's growth may be a saving grace for the company and offset a continuing decline in revenue from iTunes due to a steep and continuing decline in purchases of downloaded music from the service. Estimates indicate that the company's sophomore streaming service is adding subscribers fast enough to boost overall music revenue going forward.
Headlines across the world recently highlighted Apple's disappointing Q1 earnings, which showed a steep revenue decline of nine percent. One bright spot, however, was the growth of Apple Music, which added two million subscribers in just two months, bringing the 11 million subscriber tally reported in February to a healthy 13 million.
Apple introduced Apple Music as an effort to combat the ever-declining revenue garnered from downloads via iTunes, which reportedly fell another 10 percent in 2015. The new reality of the music business is that streaming is king, with Pandora and Spotify currently dominating when it comes to total number of subscribers, although only a percentage pay for service. Though many felt Apple was slow to catch on to the trend and late to the party with Apple Music, the $9.99 monthly streaming service now seems to be gaining momentum, and it appears that its growth will manage to offset the loss in iTunes download revenues.
Billboard estimates that, if the iTunes download sales decline continues at the current 10 percent rate, the company will need to add 1.5 million subscribers per year to offset the revenue lost. Given that the current rate of Apple Music subscriber gain seems to be around one million monthly, that will surely result in not just an offset but a large boost in revenue from overall music sales for the company in 2016.
Apple Chief Financial Officer Luca Maestri echoed these sentiments.
"It's interesting for us that our Music business, which had been declining for a number of quarters, now that we have both a download model and a streaming model, we have now hit an inflection point," he said. "And we really believe that this will be the bottom and we can start growing from there over time."
