Apple Added Two Million Subscribers in February and Has 8 Million in Trial. Does Some Credit Go to HomePod?

Apple executive Eddie Cue, senior vice president of internet software and services, told a crowd at the annual South By Southwest (SXSW) conference that Apple Music had added two million subscribers since the end of January. That brings Apple Music subscriptions to 38 million from 36 million at the end of January. All eyes have been on Spotify and its 71 million subscribers and 88 million ad-supported listeners. However, Apple Music has been growing faster than Spotify in the U.S. and is expected to become the market share leader in the country in 2018 according to The Wall Street Journal.

“Apple Inc.’s streaming-music service, introduced in June 2015, has been adding subscribers in the U.S. more rapidly than its older Swedish rival—a monthly growth rate of 5% versus 2%—according to people in the music business familiar with figures reported by the two services. Assuming that pace continues, Apple will overtake Spotify in the world’s biggest music market this summer.”

The growth rate for February was over 5% and that coincides with Apple’s HomePod launch. HomePod does not offer access to Spotify or other music services. Cue also mentioned that Apple Music has eight million users in the 90-day free trial period which suggests a modest conversion rate would keep the growth on track or increase. HomePod owners that previously didn’t not have Apple Music would be highly likely to give the service a try so they could get the most out of their device which is dedicated to music listening over other smart speaker features.

Is the HomePod Naysaying Premature?

There are competing forecasts for 2018 HomePod sales. Loup Ventures has a report out estimating unit sales to reach seven million in 2018 and grow to over 20 million annually by 2022. By contrast, Strategy Analytics is forecasting only 3.8 million HomePod sales in 2018. That lower forecast and a recent analyst report from Barclays has some investors worried. Investorplace reported this week:

“Analysts from Barclays spent a week in China visiting companies in Apple’s supply chain. The Barclays team’s verdict? Despite an initial planned production run of 6-7 million units, HomePod sales have been ‘underwhelming.'”

Skepticism about HomePod is not limited to investors. Many industry watchers have not been impressed with HomePod’s quality and The Information has a long piece about how Siri is an albatross holding it back. However, it depends what you think the role of HomePod is in Apple’s device strategy. It may be that simply driving up Apple Music subscriptions is a core reason to have HomePod at all. That would support rumors of Apple’s interest in introducing a lower-priced HomePod later in 2018. It also suggests you aren’t likely to see Spotify support on HomePod anytime soon. That will especially true if Apple see a correlation between HomePod sales and Apple Music trials and subscription growth.

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