Apple Music estimated to be 10% of Apple’s services revenues

Apple Music estimated to be 10% of Apple’s services revenues

Apple Music reached the milestone of 20 million paying subscribers in December, but how much money is it making for its parent company? RBC Capital Markets analyst Amit Daryanani has put out some estimates about Apple’s services business that give us some numbers to work with.

Daryanani claimed that Apple Music accounts for 10% of Apple’s services revenue, compared to 22% for iTunes and 33% for the App Store. Apple’s services revenues for the calendar year of 2016 were $25.5bn, but given that it started the year with 10 million Apple Music subscribers and doubled that by Christmas, simply calculating 10% of $25.5bn for Apple Music’s run rate isn’t sensible speculation.

(Better, perhaps, to suggest that based on Apple’s $7.17bn of services revenues in the final quarter of 2016, Apple Music is currently a $717m quarterly business, which would put it on course to generate at least $2.87bn in 2017 – and that’s if the company’s growth in services revenue and Apple Music subscribers flattened out.)

The RBC research note also claimed that Apple Music is delivering the lowest gross margin – 15% – of Apple’s services, compared to 85% for the App Store. As usual, it’s wise to remember that Apple also takes a 30% cut of any in-app music subscription purchased through iOS: Spotify, Pandora, Deezer and others are contributing to those healthy App Store margins.

Still, Daryanani sees plenty of room for growth with Apple’s own streaming service, noting that with just 3% penetration in Apple’s install base, it is a “very attractive opportunity” for growth. The key question for the music industry is what kind of throttles Apple is preparing to switch on to drive that growth.

Source: AppleInsider –