Spotify made headlines late last month when news hit that the company filed with the U.S. Securities and Exchange Commission (SEC) to go public. The Form F-1 filing revealed a wealth of key metrics for the company, including its 71 million subscribers, well over the 38 million boasted by its nearest competitor Apple (NASDAQ: AAPL).
Competition in the streaming music space is intensifying, according to The Infinite Dial, an annual survey of digital music by Edison Research and Triton Digital. The survey shows that while Spotify is gaining ground, competitors like Apple and Amazon.com (NASDAQ: AMZN) are growing at a much faster pace.
An Apple a day
Apple's music streaming service, which debuted in June 2015, is growing more quickly than Spotify according to the survey. 10% of respondents reported listening to Apple Music in the previous 30 days, up 25% over the prior period. 20% of those surveyed indicated that they had streamed Spotify in the prior month, up 11% from the prior survey.
Those findings mirror those reported elsewhere. Apple has been adding U.S. subscribers at a rate of 5% per month, compared to only 2% for Spotify, according to reports in The Wall Street Journal. At this rate, Apple will overtake its older rival in terms of domestic subscribers as early as this summer.
Apple recently released its HomePod smart speaker, which the company is specifically marketing to the Apple faithful and audiophiles. This may help increase the likelihood that Apple Music's growth spurt will continue.
The dark horse
Subscribers to Amazon's Music Unlimited service pay $9.99 per month -- similar to its competitors -- for access to the company's 40 million titles, as well as personalized stations and thousands of curated playlists. Members of Amazon Prime pay only $7.99 for the privilege. The advantages are even starker for owners of the Echo smart speaker, who pay only $3.99 per for month for the unlimited music streaming service.
This strategy appears to be paying off. According to the survey, 9% of all respondents age 12 and older had listened to Amazon Music in the prior month, a 50% increase year over year. The study also revealed the number was even higher among smart speaker users, as Echo owners subscribe to its Amazon's music service at about twice the rate of overall respondents.
Amazon recently expanded its streaming music service to an additional 28 countries and is simultaneously introducing the Echo in those same locations. The higher frequency of music streaming among Echo owners has no doubt caught Amazon's attention, and the company is likely eager to leverage these users across its ecosystem.
The Trojan horse and the outlier
Google Play Music from Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) appears far down the list when considering streaming music services, with 6% of those surveyed reported using it in the prior month. YouTube, however, deserves special mention. Respondents on the survey were asked if they had "used YouTube to watch music videos or listen to music in the last week?" A whopping 46% indicated that they had, more than all other on-demand streaming services combined. While this doesn't fit within the scope of subscription-based on-demand streaming music services, it bears noting nonetheless.
It's also worth mentioning that while Pandora (NYSE: P) played prominently in the survey, the majority of its business is internet radio, and its on-demand streaming subscribers number of just 5.5 million is far below the levels of any of its on-demand-focused brethren. Additionally, the company recently reported 74.7 million active listeners, down 8% year over year, as the service continues to hemorrhage users.
It is important to note that streaming music is still in its early days and many still question the long-term viability of the business model. Tech giants like Apple and Amazon can afford to use music as an incentive for those that choose its ecosystem. Spotify meanwhile has yet to produce a profit, underlining the difficulty in generating income in a business shackled with razor-thin margins.
10 stocks we like better than WalmartWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of March 5, 2018The author(s) may have a position in any stocks mentioned.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares), Amazon, and Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Pandora Media. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.