Apple Music: Will ByteDance Threaten Its Growth?

Apple Music (AAPL) has a new reason to worry. Spotify (SPOT) was already a tough competitor, but now it also has to face off with Chinese company ByteDance.

Quoting the Financial Times, the South China Morning Post discussed the details of ByteDance’s plans on November 18. The Chinese company is the owner of TikTok, and it will soon launch a music-streaming platform. As per the Financial Times, the service is unnamed and will initially target emerging nations such as Brazil, Indonesia, and India. The report didn’t reveal the subscription cost. However, it hinted that it would be lower than the $10 per month charged by Apple and Spotify.

The report also indicated that ByteDance was already in talks with Sony Music, Warner Music, and Universal Music for licensing contracts. In April this year, the South China Morning Post reported that ByteDance was probably launching a music-streaming app.

Recently, TikTok has become immensely popular across the globe. The Post cited data by Sensor Tower indicating that the number of downloads for TikTok had crossed 1.5 billion last week. ByteDance wants to capitalize on its vast user base to launch this new music-streaming app. The company’s entry into this space may be a significant challenge for Spotify, which has more than 200 million users, while its paid subscribers total 113 million. The Swedish company lost nearly 5% in yesterday’s trading on this news.

Apple is quickly catching up with Spotify

Apple Music crossed the 60 million subscriber mark in June, within just four years of its launch. In April, the Wall Street Journal reported that Apple Music had overtaken Spotify in terms of growth in the US subscriber rate. Apple’s music-streaming service posted a monthly growth rate of 2.6%–3%, while that of Spotify was 1.5%–2%. In March, Spotify complained to the European Commission that Apple was allegedly using unfair tactics to undermine the competition. While Apple Music is fighting for space with Spotify, ByteDance’s entry will be another challenge.

To know more, read Spotify Subscribers Beat Apple Music: What’s Ahead?

Amazon to launch a free version of Amazon Music

Yesterday, Amazon announced the launch of its ad-supported free version of Amazon Music. The free version was already available on Alexa devices and Echo speakers. However, this time, the service will also be available to Android, iOS, and Amazon Fire TV users. This isn’t much of a concern for Apple Music because it only offers paid subscriptions. However, Spotify offers a “freemium” model and will face direct competition. As per Business Today, Spotify has about 140 million users on its free plan.

Apple Music sees encouraging growth

About Apple Music, back in January 2018, CEO Tim Cook told Fast Company, “We’re not in it for the money.” However, within four years of its launch, Apple Music has demonstrated impressive growth. Apple Music is a part of the iPhone maker’s strategy to branch out from iPhone dependence. On Apple’s fiscal 2018 third-quarter earnings call, Cook revealed that during the quarter, “Apple Music grew by over 50% on a year-over-year basis.” He also said that Apple Music had emerged as a leader in North America and Japan. However, on the company’s latest earnings call, Cook didn’t disclose any numbers. He said that the company had reached “new all-time highs for multiple services categories.”

In 2018, Evercore ISI analyst Amit Daryanani estimated that Apple Music alone could be worth $15 billion–$20 billion, noted Digital Music News.

Bundling could save Apple Music from competition

Competition seems to be intensifying in the music streaming space. In this situation, the bundling could come to the rescue of Apple’s music streaming service. Last week, there were talks of Apple offering a subscription bundle that would include Apple Music, Apple News+, and Apple TV+. When offered as part of the bundle, Apple’s music-streaming service could face a lower risk of subscriber churn. In the subscription business, more than making profits, the challenge is holding onto and increasing subscribers. Cook highlighted this on Apple’s fiscal 2018 third-quarter call. He explained, “The key thing in Music is not the competition between companies that are providing music; the real challenge is to grow the market.”

In the initial days, ByteDance will launch in emerging nations, but if it plans to expand to the US and Europe, the competition will get fiercer.

While Apple stock edged up yesterday, Spotify dropped 4.9% to close at $140.26. On a month-to-date basis, Spotify is down 2.8%.