Apple Music already generating more than $65M in monthly revenue

With a high percentage of trial members converting to paid subscriptions, Apple could soon be raking in a billion dollars or more yearly from Apple Music.
Written by Kevin Tofel, Contributor

Now that the initial three-month trials of Apple Music are up, we can begin to tell if the service is a chart-topper. Apple CEO, Tim Cook, tells the Wall Street Journal that of the 15 million Apple Music users, 6.5 million of them are paying subscribers.

In a worst case situation, that works outs to $65 million of additional revenue for the company. That's based on the $9.99 a month subscription fee but surely some -- like me -- are paying $14.99 a month for the family plan, meaning the revenue figure is even higher.

Assuming no change in the subscriber base, that puts Apple Music on a $780 million annual revenue run rate. Not bad.

Perhaps even more impressive is that the percentage of active users paying for a subscription is fairly high compared to Spotify.

That music service launched seven years ago and boasts 20 million paying subscribers from its 75 million users. By comparison, Apple Music has a much higher sell-through rate, although some of that surely has to be due to the automatic renewal process built in to the trial. Here's how you can disable it.

Compared to Spotify, Rdio, Pandora and other music streaming services, Apple was surely late to the game. Indeed, the company didn't even build Apple Music from scratch; it spent $3 billion to acquire Beats Music and integrate that service into its own software.

That's typical Apple though: Wait for a market to develop and then design away the pain points from it. And that makes sense, particularly in the case of streaming music. When Spotify launched, LTE networks didn't exist and the current smartphone revolution was just getting underway.

Will Apple Music subscriptions keep growing? That's hard to say, of course, but the company has three big things in its favor.

Cook says there are still 8.5 million people trialing the service, which gives it 8.5 million opportunities yet to convert them to paying subscribers.

And Apple Music is pre-installed on every new iPhone -- not to mention comes with iOS 9 software upgrades on older iOS devices -- adding an even greater number to the potential figures. Apple previously said that it would offer Music to Android users as well, which should be happening soon, bringing even more potential customers.

It's not out of the question that by this time next year, if not sooner, Apple Music is on a $1 billion revenue run rate annually, making that $3 billion Beats investment look like a shrewd move in the long run.

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