Apple v. Spotify
Apple depends increasingly on revenue and profit from its robust Services segment to drive financial results. We at CIRP have long maintained that Apple confronts a brutally competitive market for the range of services it offers, including streaming audio and video, extended warranties, cloud storage, and news and other information. This week we are looking at streaming audio, covering both music and podcasts.
Spotify is Apple’s key streaming audio competitor. We can look at how Apple compares with Spotify in both segments: streaming music and podcasts. Apple delivered music long before Spotify even started, predating streaming and going back to the original iTunes service. And while Apple did not invent the word “podcast” (it predates podcasts being available on iTunes), it was coined to combine “iPod” and “broadcast”, so Apple was still part of the origin story.
Yet, for Apple device owners, Spotify has caught up to Apple in streaming music and podcasts, despite launching its podcast service only a few years ago.
The service model differs between Apple and Spotify. Apple provides streaming music through Apple Music, for which it charges a monthly fee. Apple does not offer a free streaming music option. Apple does not have a subscription-based podcast service. All podcasts are available through the Podcast app, with publishers offering them for free or charging a fee, which Apple takes a share of.
Spotify has free and paid subscriptions. Both music and podcasts are available in either subscription, with some content exclusive to paid Spotify Premium members and an ad-free experience justifying the monthly cost.
Many Apple customers have both Apple Music and a free Spotify subscription. Of course, relatively few customers pay for both Apple Music and Spotify Premium, since the services are primarily redundant.
In 2024, half of Apple customers used paid Apple Music, while 41% used Apple Podcasts (Chart 1). While not as prevalent as music, podcast use has increased steadily in the past few years.
Chart 1: Penetration of audio services for Apple customers (12 months ending December 2024, multiple responses allowed)
Apple customers use Spotify (free and/or paid) to a roughly similar extent as Apple Music. Podcast use is similar, too, with 38% of Apple customers using Spotify for podcasts and 41% reporting using the Apple podcast app. For music, the paid Spotify Premium service lags Apple Music, with 30% of customers paying for Spotify. The free Spotify service is as popular as Apple Music, with 51% of Apple customers using it.
Given the later start, and the non-native nature of the app, Spotify has caught up nicely to Apple. This is especially notable in podcasts, which arrived at Spotify only in 2018, 13 years after they were added to iTunes. Spotify Premium has a smaller share of Apple customers than Apple Music, yet the free Spotify service gives Spotify a foothold with a large base of Apple device owners.
Apple’s Services businesses are fantastically profitable with even higher margins than their enviable hardware lineup. Still, they face real competition from pure-play operators like Spotify.