Boomers Lead Apple Inc. (NASDAQ:AAPL)’s Apple Music To #2 Spot in Paid Subscribers But 40% Drop After Free Trial

Some good and some bad news for Apple Inc. (NASDAQ:AAPL)‘s Music Service. While the service is now #2 in paid subscribers, the company continues to see exodus from its Apple Music service after users’ free trials come to an end. It is emerging that 40% of those who signed up to test Apple Music in the first three months have walked away. The service is also proving to be much more of a hit with Boomers than Millennials.

Apple Inc. (NASDAQ:AAPL) expected a tough challenge in the streaming music space when it entered the scene to challenge Spotify and others with Apple Music. However, it is unclear whether CEO, Tim Cook and his team anticipated the kind of walkout they are seeing in Apple Music.

During the initial phase of Apple Music free trials, Apple’s executives talked about the service having attracted some 11 million users. However, slightly over three months down the line, Cook is saying that only about 6.5 million have retained their Apple Music subscription and are paying for it. That indicates a sharp decline from 11 million at the height of the first period and shows many are choosing not to pay for the service after testing it.

100 million subscriber target

Apple Inc. (NASDAQ:AAPL) reached about 11 million subscribers initially, which increased to almost 15 million. However, only 6.5 million subscribers are currently paying for the service and not on a free trial. For a company that is looking to reach 100 million paid subscribers on Apple Music, the 6.5 million paying users means that Apple is only less than 10% through its target.

Free Apple Music offering going on

Apple Inc. (NASDAQ:AAPL) will continue to offer Apple Music free for new generation of testers. However, questions are being asked about how the company will sustain growth of Apple Music subscription after the service has lost its newness attraction.

Apple chooses premium-only

Although most other streaming music providers offer free ad-supported streaming services, Apple is positioning its Apple Music as a premium-only service. After the end of a three-month trial, testers are required to pay $10 per month for a basic account to retain their subscription. A family subscription starts at $15.

In the streaming music business, Apple Inc. (NASDAQ:AAPL) is battling for market share against industry leader Spoify, which boasts millions of paying and free subscribers. Pandora Media Inc (NYSE:P) is also another challenger to Apple’s Apple Music.

With 40% of initial users failing to pay to retain their Apple Music subscription, Apple Inc. (NASDAQ:AAPL) has to figure out how to create paying subscribers from those that come for free testing.

More stickiness among Boomers than Millennials

Apple Inc. (NASDAQ:AAPL)’s Apple Music is seeing more stickiness among older people than millennials. Most of those paying for Apple Music subscription are people aged 65 years and above. In contrast, only a small fraction of younger people are retaining their subscription after testing the service for three months. Apple recently disclosed that it has 6.5 million paying subscribers on Apple Music. The company is targeting 100 million paid subscribers.

Age is turning out to be a major factor in the adoption of Apple Music. Independent analysts have looked into Apple Music subscription data and turned up interesting results. With the initial phase of Apple Music trialing over and people are asked to pay up to retain the service, millennials are heading for the exit door, but most boomers are staying put.

According to Jackdaw Research’s analyst, Jan Dawson, people above 65 years of age dominate the Apple Music paying population. One of the attractive things in Apple Music for boomers is that they are able to look up for songs they already love.

Song discovery Playing a Role?

However, millennials appear more interested in the opportunity to discover new music on Apple Music. Nevertheless, despite the compelling benefit of music discovery, not many millennials are sticking with Apple Music after they give it a try for free.

Apple Inc. (NASDAQ:AAPL) allows new subscribers to stream Apple Music free of charge for three months. It has concluded the initial phase of Apple Music free trial about a month ago and is admitting a new generation of testers. After accessing the service free for three months, Apple charges $10 for a basic account and $15 for an entry-level family account.

Not all bad news as it is the 2nd Biggest Paid Music Service

Even with the hiccups the service remains 2nd to only Spotify’s 15 million subscribers and has already overtaken Deezer’s six million total subscribers, Pandora Media Inc (NYSE:P)‘s 3.9 million paid subscribers, and Rhapsody/Napster’s three million paid users. The service also generates an estimate $65 million monthly revenue for the company.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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