Apple recently announced price increases for Apple Music, Apple TV Plus, and Apple One, which bundles multiple services together. This marks the first time Apple has raised the subscription cost of Apple Music since its launch in 2015. And many existing users have wondered why. And while it’s technically because Apple wants more money, the reasons behind their need for more profit is pretty interesting.
Especially since the price increase makes Apple Music 10% more expensive than its biggest competitor, Spotify. Causing some users to choose the more affordable service over Apple’s. But Apple has never shied away from pricing their products higher than the competition. Steve Jobs himself said Apple should compete at the high-end of every respective market, offering the most premium product for a premium price. That strategy is what fueled Apple’s industry-leading 20-30% profit margins. Resulting in Apple’s making up just nine percent of the computer industry but capturing the majority of revenue.
And that’s the approach Apple is taking to services. Despite Spotify’s billions of dollars in revenue each year, they still haven’t achieved profitability. And that’s not acceptable for Apple. That’s why they tried to convince music labels not to renew their license for Spotify’s free tier. Since Apple didn’t want users becoming accustomed to freeing music streaming, which was not profitable at all, no matter how many ads were played.
That’s why Apple has never offered an ad-support free Apple Music option, nor will they ever. Instead, they’ve tried to make the service more valuable by offering features like spacial audio and lossless audio. Hoping the premium experience will convince users to pay a premium price. Which is now $1 higher than before. Apple tried justifying the price change by claiming the extra dollar would pay for increased licensing costs that will provide more money to artists and songwriters, although they haven’t specified how much more they’d pay artists per stream. Which currently stands at one cent compared to Spotify’s half-a-penny. So, we’ll have to wait and see if users are willing to pay more for the same service, or if they decide to jump ship and save with Spotify instead.