In a note to clients — as noted by the Wall Street Journal — Macquarie Capital analyst Ben Schahter estimates that Apple Music will average 40% annual growth over the next three years, making it the fastest-growing part of the company’s Services segment.
He says Apple is expected to report total service revenue of $8.3 billion for the fiscal second quarter being reported on May 1—up 18% on year. However, Schachter notes that the streaming music service is likely to be one of the least profitable parts of the business due mostly to the royalties streamers must pay to labels and artists.
Schachter estimates that Apple Music commands a gross margin of around 15%. That’s actually lower than the 24% that Spotify projects for this year.
Still, Apple Music has now surpassed 40 million subscribers. Apple services include Apple Music subscriptions, iTunes Music, iCloud storage plans, paid apps from the app stores, AppleCare service plans, Apple Pay, etc.
Like this article? Consider supporting Apple World Today with a $5 monthly Team AWT membership.
