Spotify Hits 100 Million Users, Is Apple Losing Music Streaming Race?

Shutterstock photo

Spotify reminded the world that it is still the leader in the increasingly crowded music streaming market on Monday. The Sweden-based company announced that it has officially crosses the 100 million monthly active user mark.

To those who follow this segment of the market closely, today's news may not come as much of surprise. Spotify has held the most users in this space for some time now, and the company's model of allowing users restricted access to its library for free seems to work to its advantage.

Spotify's biggest competitor right now is Apple's AAPL Apple Music service. While Spotify's premium subscription is comparable to Apple Music, Spotify also allows users to stream music for free. In fact, most Spotify users tend to choose this ad-supported option, and the company targets these existing users to become fully-paying customers.

Despite Spotify crossing the 100 million user threshold first, one would assume that the entrance of Apple Music and other competitors like Alphabet Inc.'s GOOGL Google Play Music and Jay-Z's Tidal platform would be slowing the leader down. However, according to data from Jackdaw Research , Spotify's user growth has actually accelerated since Apple Music debuted in 2015.

"Far from putting a dampener on Spotify's growth, Apple Music seems to have accelerated it, if anything. More likely, the streaming music industry has simply reached a tipping point, and both the Apple Music launch and Spotify's success in 2015 are symptoms of that common cause," said Jan Dawson of Jackdaw.

Dawson brings up a good point here. It's less about the fact that Spotify is winning or that Apple is losing and more about the fact that the mass public has bought in on online music streaming. Just as we saw "cord-cutters" flock to combinations of Netflix NFLX , Amazon AMZN , and Hulu, there appears to be room for more than one major player in this field.

Nevertheless, as Spotify continues to grow it will need to figure out how to make its business model profitable. The company is still bleeding cash, with its most recent filing reporting a nearly $200 million loss. While growth and revenue have been solid, the vast majority of its revenue goes to paying royalties to the music industry.

"The good news is that there have been other individual markets (mostly in Europe) where Spotify has become profitable over time, and so there's a precedent for profits following scale on a more local level," Dawson said.

While Apple and Alphabet can afford the costs of growth for their smaller music offerings, Spotify is a one-trick pony. The company will need to find a way to trim costs, especially if it ever has the hopes of going public.

Want the latest recommendations from Zacks Investment Research? Today, you can download  7 Best Stocks for the Next 30 Days Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

NETFLIX INC (NFLX): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

ALPHABET INC-A (GOOGL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
Referenced Symbols: AMZN , NFLX , AAPL , GOOGL

More from Zacks.com




Equity Research

Research Brokers before you trade

Want to trade FX?

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com