Latest Apple Music Updates
Apple needs a strong music streaming service that it can use as a must-have anchor service to sell other subscriptions.
The big chunk of future service segment growth will depend on how much growth and market share Apple is able to maintain within this segment.
Apple (NASDAQ:AAPL) is facing challenges from Amazon (AMZN) and Google (GOOG) within the music streaming industry. The company has not reported subscriber numbers within this service for over 2 years. One of the reasons could be that there has been a growth slowdown in net subscriber additions. Third-party estimates by MIDiA Research have shown that Apple Music has a 15% market share which is followed by Amazon Music at 13% and YouTube Music at 8%. Both Amazon and Google have a very strong presence in the smart speaker and smart display market which are providing good tailwinds to their music streaming business.
The contribution of music streaming business to Apple's top line and bottom line is very less which reduces the impact on key financial metrics in the quarterly reports. However, it can have a big impact on the service segment growth in the long run. Hence, any dip in market share for the music streaming business can be a big challenge for the management. It may lead to lower growth estimates for the Services segment which can be a major headwind for Apple stock.
Short-term impact on Services segment and stock sentiment
Apple reported Services revenue of $19.8 billion in the latest quarter. The total net sales for the quarter was $97.2 billion. The revenue share of Services segment was only 20% but it plays a much bigger role in the valuation thesis of Apple stock. Apple's valuation multiple has expanded in the last few years based on the growth potential of Services segment, while the growth in Products like iPhone, Mac and others has been modest.
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