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Apple Music Cranks Up Spotify Demand

Apple Music Cranks Up Spotify Demand

REUTERS: When Apple first launched their Music service, several analysts predicted that it would strip share away from the likes of Spotify.

But the reality is that it’s had the reverse effect with Spotify reporting a faster pace of growth since the launch in June last year of Apple Music Company executives have claimed.

Spotify, which was created in Stockholm 10 years ago, now boasts of having close to 100 million users in more than 59 markets, despite increasing competition, what eludes them is profits.

“It’s great that Apple is in the game. They are definitely raising the profile of streaming. It is hard to build an industry on your own,” Jonathan Forster, a vice president and one of its first employees, told Reuters in an interview.

“Since Apple Music started we’ve been growing quicker and adding more users than before.”

“It would be terrible if we were just taking each other’s users or to learn there was just a ceiling of 100 million users – I don’t think that is the case,” said Forster, who had just returned to Stockholm from the Coachella Valley Music and Arts Festival in California.

Spotify now has 30 million paying users, making it the market leader in music streaming, while Apple Music has reported having 13 million paying subscribers since its launch last year in over 100 countries.

But the company is facing competition on more fronts than just Apple, from players such as Pandora Media and newer rivals such as German start-up SoundCloud and U.S. music producer and rapper Jay Z’s Tidal. Meanwhile Alphabet Inc’s Google is competing with both YouTube and Google Play Music.

Forster said having multiple streaming services was not sustainable in the long run.

“My Internet history would tell me that there’s probably not going to be that many significant players, and then maybe smaller niche cases … maybe there could be a classical music streaming service,” he said. “It’s a hard business.”

Asked about acquisition possibilities, Forster said future purchases would be on a similar scale to its recent deals in order to bring on new teams and technology.

“I wouldn’t be surprised to see Spotify continue to invest in areas that are relevant or adjacent to our business,” he said.

Revenues will continue to come largely from subscriptions but Spotify will also hunt for other income in areas such as concerts, merchandising and video, though Forster was quick to add that the company was “not trying to be a Netflix “.

The company on Monday launched a new video offering which will include exclusive content, like short, behind-the-scenes videos of artists.

And Spotify has no intention of slowing its pace of expansion, having said in March that it had raised $1 billion in convertible debt from U.S. firms TPG Capital and Dragoneer Investment Group.

Forster said that it was reassuring that the company’s conversion rate for turning new users of the advertising-based service into subscribers, had held up at 25 to 30 percent, despite its user growth.

“That should have a negative effect on the conversion rate but it hasn’t,” he said.

Asked whether Spotify could be an acquisition target for a larger technology company like Google or Facebook, Forster said: “I’ve always felt Spotify likes being Spotify. We have fought to get to where we are today and we are quite happy and it would be emotionally hard not to be us, but who knows?”

“I think that people have really woken up to the opportunity of streaming. We can see that it is just the beginning. We’ve never grown quicker than we have.”

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