Is Apple Music having ‘no meaningful impact’ on streaming market?

Has Apple Music’s launch been less revolutionary than anticipated?

Streaming radio firm Pandora is in high spirits: last week, the company posted a $1 billion turnover within a 12 month period for the first time in its history. (Admittedly, a $16.1m Q2 net loss takes the sheen off slightly.)

What’s perhaps even more interesting than the hard numbers, though, is a telling comment made by Pandora CEO Brian McAndrews in a subsequent call with investors.

McAndrews was asked by an analyst how Apple Music’s launch had impacted Pandora so far.

In response, the exec calmly explained that, with Apple Music having launched on June 30, it couldn’t have exacted any material effect on Pandora’s Q2 results – which covered the three months to end of June.

But then McAndrews went a little further. And openly laid the smackdown on his rival.

“You know, we feel really good about our trajectory and competitive [standing],” he said.

Brian McAndrews“we aren’t seeing any meaningful listener impact from apple music and we don’t expect to see any long-term meaningful impact either.”

Brian McAndrews, Pandora

“I think it’s really obviously very early days [for Apple Music] and with any big launch like this – the noise and things happening in the marketplace – there could be some listeners who experiment… there could be some short-term impact.

“But we aren’t seeing any meaningful listener impact at this time and we don’t expect any long-term meaningful impact either.”

Touché Tim Cook, who told his own investors this month that “millions and millions” were already signed up to Apple Music’s three-month free trial.

Further MBW analysis suggests why Pandora’s McAndrews might have had a point.

As you may have seen elsewhere today, the BPI has just announced that 500m-plus audio streams are now taking place in the UK each week.

It’s big news, with the chart week ending July 16, 2015 the first in history to breach the milestone.

But here’s the thing: look closely at this graph, which depicts audio streaming’s average weekly volume in the UK month-by-month since last year.

BPIstreams

As mentioned, the ‘July 15’ field is only representative of the week we know about  in that month – the one that saw 505.85m streams.

It’s also the only field to take into account data from Apple Music, after its UK launch on June 30.

Setting aside the fact that there was a dip in month-on-month growth in streaming volume in June (!), this graph is hardly a ringing endorsement for the industry-changing impact of Apple Music.

To illustrate that a little better, here’s a chart showing what the month-on-month increase/decrease in millions of UK streams (per average week) looks like when applied to the data above.

AppleMusic

So July 2015 – post Apple Music launch – is tracking around 22.3m more streams in the UK per week than what we saw in June, pre-Apple Music launch.

That sounds very healthy until you consider the fact that the month-on-month increase was actually bigger in six of the previous 11 months on record.

What these numbers don’t show, of course, are some other potentially vital factors, including:

  • June and July have suffered from an even-more-deathly-than-usual release slate, meaning that new music won’t be driving people to stream like it would in the second half of the year;
  • How many of those 505.85m weekly streams were stolen by Apple from the likes of Spotify, Google Play or Deezer?
  • Is Apple concentrating more on its US stronghold than Europe?
  • And, naturally, what will happen in the months and years ahead.

But whichever way you slice it, Apple Music’s arrival simply hasn’t had a revolutionary effect on streaming usage in the UK. So far, anyway…

This raises some interesting questions about the mainstream appeal of streaming, and its price point: if Apple Music’s three-month free trial isn’t growing the market significantly, and month-on-month numbers are actually starting to dip (again, in the very quiet summer period) is the $9.99-per-month streaming offering starting to exhaust its growth potential?

As for Brian McAndrews’ “no meaningful impact” line?

That’s a pretty negative take, but you have to say this data suggests he’s got a point.

Back to Pandora’s earnings call, and a little more showing off from CFO Mike Herring – on a touchy subject amongst the creative community: Pandora payouts to artists and songwriters.

Herring matter-of-factly revealed: “Pandora is proud to say we are now on track to have paid more than $1.5 billion in total royalties by the end of this month. We’re happy to contribute to the artist economy in a meaningful way.”

“Pandora is now on track to have paid out more than $1.5bn in total royalties by the end of this month.”

Mike Herring, Pandora

For streaming business watchers, that means Pandora has now paid out exactly half as much to creators as Spotify – which revealed its $3bn lifetime artist/songwriter paycheque in Q1 this year.

Brian McAndrews also said Pandora was confident of reaching 100m monthly unique users in the near future, after hitting 79.4m in Q2 – up slightly both on a quarter-to-quarter and year-on-year basis.

“We believe it is achievable in terms of the kinds of investments we are going to be making,” he said.

“[That’s] continuing to make investments in our playlist technology and brand marketing spend – we will continue to do [so], and are actually ramping up, in Q3 and Q4 of this year.”Music Business Worldwide

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