Recent price increases were announced by Apple for Apple Music, Apple TV Plus, and Apple One.
Since Apple Music’s launch in 2015, the subscription cost has never been raised. The reason for this has been a mystery to many existing users.
It’s technically because Apple wants more money, but the reason behind their desire for more profit is pretty interesting. As a result, Apple Music now costs 10% more than Spotify, its biggest competitor. Thus, some users choose the cheaper service over Apple’s.
In spite of this, Apple’s products have always been more expensive than their competitors. In his own words, Steve Jobs said Apple should compete at the top of every market by offering the most premium product for the most premium price. That strategy is what fueled Apple’s industry-leading 20-30% profit margins. Apple makes up just nine percent of the computer industry, but captures the majority of revenue. And that’s the approach Apple is taking to services.
Although Spotify generates billions of dollars in revenue every year, the company has yet to become profitable. And that’s not acceptable for Apple. This is why they tried to convince music labels not to renew their licenses for Spotify’s free tier. Apple did not want users to become accustomed to free music streaming, which was not profitable no matter how many ads played. Because of this, Apple does not offer an ad-supported free Apple Music option. Instead, they’ve added features like spatial audio and lossless audio to make the service more valuable. Hoping the premium experience will convince users to pay a premium price. Which is now $1 higher than before.
According to Apple, the extra dollar would cover increased licensing costs, which would provide more money to artists and songwriters, though they haven’t specified how much more they’ll pay. Which currently stands at one cent compared to Spotify’s half-a-penny. Let’s see if users are willing to pay more for the same service, or if they decide to switch to Spotify and save.
