Watch Out Spotify, iTunes Subscription Service Could Be Worth $1 billion

Spotify iTunes


About 15% of U.S. iTunes users are willing to pay at least $10 per month for a music-subscription service, according to a new study by the NPD Group. The report, which concludes that between 7 million and 8 million users have a strong interest in a paid-plan with Apple, suggests that consumers are becoming more and more interested in streaming services and having Web or mobile access to their music libraries. And even though cloud-based Spotify has already built a hugely successful streaming service in Europe, Apple’s entrance into subscription-based music could crush Spotify’s plans for its upcoming launch in the U.S. market.

Since 2008, iTunes has been the top music retailer in America ahead of both Best Buy and Walmart, and it’s estimated that Apple owns approximately 70% of the digital music market. Spotify, on the other hand, has gained almost 7 million users in Europe, but the majority of them access only its free service. A subscription service from Apple, NPD’s report shows, would capture as many if not more users than Spotify, all of whom would be willing to pay a monthly fee for a subscription.

Record labels are also becoming increasingly skeptical of music services like Pandora and Spotify. Edgar Bronfman, CEO of Warner Music Group, said in an earnings call recently that WMG would no longer support ad-based music streaming services. And one report from Sweden claimed that Lady Gaga earned only $167 for 1 million streams of her single “Poker Face” on Spotify. If Apple can prove to the major labels that it can offer a financially viable subscription-based streaming service, there should be no question that WMG, Sony, EMI, and Universal would all sign on with the more established company.

Certainly, NPD Group’s report indicates that Apple’s service would be financially viable. With up to 8 million users willing to pay a monthly fee of $10, that would bring in an additional $960 million to iTunes’ already lucrative music store. Watch your back, Spotify.

About the author

Austin Carr writes about design and technology for Fast Company magazine.