Must Apple be number one at everything it does? Does being number two — or three for that matter — mean the company has somehow failed? Hardly. With record revenue and profits, it certainly doesn’t seem that the company is confronting potential failure at every turn. But it’s not always the market leader.
Take the Macintosh personal computer. It has never been the most popular PC on the market. Although Apple sells far more than it used to, its worldwide market position ranges from fourth to sixth place. The assumption that the Mac is somehow failing has long ago been disproven. It’s a profitable product, more profitable than most of all of the competition.
So how can it possibly be a failure? Might as well suggest that all auto makers, except for Volkswagen, whose worldwide sales last year were slightly ahead of Toyota, should just give up and close shop.
Oh, and Samsung has often sold more smartphones than Apple, although the iPhone emerged as the market leader again in the December 2017 quarter. But even when Samsung did better in unit sales, Apple still earned far more revenue and profits from its iconic smartphones.
And don’t forget the Apple TV, a product that has yet to demonstrate its expected potential. Should Apple just abandon it?
So where am I heading?
Well, a certain writer at Macworld has done it yet again, this time with a story suggesting what Apple must do in order to gain market share of one of its services, Apple Music.
Well, the service that descended from Beats Music, and debuted in 2015, now has 36 million paid subscribers. It’s a pretty decent number for the nearly three years of its existence. It is now reported that Apple will soon become number one in the United States.
But those numbers don’t rate so high compared to the 70 million paid Spotify subscribers around the world, meaning there are many countries where the latter is way ahead of Apple Music. So is there anything Apple could or should do in order to achieve number one status?
Does it even matter?
Well, according to the Macworld blogger, Apple should be launching a free tier in order to entice more people to sign on. As it is, you get a three month trial subscription, after which you can opt to continue and have your credit card billed for the service or cancel. The logic is that Apple ought to do offer a totally free version, with the assumption there will eventually be more paid signups.
Spotify reportedly has a total of 140 million active users. If you opt for free, ads are inserted between tracks to derive income, roughly similar to a commercial radio station. Well except for SiriusXM satellite radio, where the music channels are free of ads, but not dj chatter.
Now Apple has not traditionally offered services with paid ads. More to the point, how long does it take for the free members on Spotify to subscribe? A month? Six months? Does anyone outside the company even know? Would doubling the free Apple Music trial — thus six months — make a big difference, or will it just collect additional free loaders who quit and eventually return with different user names and credit cards?
Says, the blogger, “With a free Apple Music tier, Apple would not only get music fans to flock to its service in droves, it could also use it as a way to advertise HomePod as the best way to listen to Apple Music at home and AirPods as the ultimate on-the-go solution. With quick ads between songs, it would be speaking directly to a captive audience who shares a love for music. Simply put, there’s no better way to advertise.”
How does he know? Do most Apple Music subscribers wait till the very last minute to sign up? How many just up and quit? Is it worth setting up a separate advertising division to turn it into roughly the equivalent of a commercial radio station with the hope of increased profits and more conversions to paid memberships? Does Spotify really make much money offering free? What sort of profits does the company even earn?
I’ll be blunt. Even though Spotify’s income has increased every year, it still suffers from hundreds of millions of dollars in red ink. In other words, its marketing plan is failing to yield profits, and you wonder how long it can be sustained before it has to turn the corner. Or will increased cash flow keep it going for the foreseeable future?
So, yes, Spotify has more paid subscribers. But it hasn’t demonstrated that size matters when attempting to earn profits so far.
Macworld’s blogger doesn’t seem to understand that Apple doesn’t put unit sales above revenue and profits. I have little doubt that Apple has considered different marketing plans for Apple Music, and if it could earn big bucks with many more paid signups from a free tier, I suspect they’d consider it.
But I don’t know if they could, and the blogger suggesting that they do offer a free service doesn’t either. That Apple Music will become number one in the U.S. may only be the beginning of a trend and, over the years, maybe it will overtake Spotify. But Apple is not going to kill the service’s profits to get there.