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Apple Extends Alliance With Verizon to Boost Music Service

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Apple (AAPL - Free Report) recently expanded ties with Verizon (VZ - Free Report) driven by positive user response to its earlier partnership with the company. Notably, since last August, Verizon has been offering a six-month free trial of Apple Music subscription to its postpaid unlimited data subscribers.

Starting Jan 17, 2019, the iPhone maker’s Music subscription service will be offered for free to the U.S. telecom company’s customers subscribed to plans, Beyond Unlimited and Above Unlimited. The users can freely access Apple Music’s 50 million songs across a variety of Apple and Android devices.

Additionally, Verizon will continue to offer Apple Music free trial for six months to its unlimited plan users.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM) | Apple Inc. Quote

Partnerships to Boost Subscriber Base

Apple’s partnership with the largest U.S. telecom company, Verizon, is expected to boost its user base and competitive position primarily due to growing subscriber base. Notably, Verizon added 515,000 U.S. retail postpaid connections in third-quarter 2018 in the wireless segment. Moreover, the company added 1.2 million retail postpaid connections in fourth-quarter 2018.

Also, Verizon users will get high Internet speed after the company deploys 5G wireless services and provide mobile hotspots in multiple U.S. markets in 2019. This initiative may also help Apple witness increasing adoption of its Music services among Verizon’s customers, given the speed and flexibility 5G provides.

Earlier, Amazon (AMZN - Free Report) had confirmed that Apple Music subscribers with Echo devices can enjoy the services on its devices. With smart speakers mainly being used to listen to music (70%) in 2018, per a Adobe Analytics survey, Apple is expected to gain from this trend.

Apple also partnered with Samsung to make iTunes content available on the latter’s smart TVs. The move is expected to help Apple reach customers outside its iOS ecosystem as Samsung commanded 33% smart TV market share in the United States in 2018, per Statista, and is also the world’s largest TV manufacturer with more than 20% market share.

Can Apple Gain Edge Over Spotify?

Apple had 56 million subscribers (paid and free) as of fourth-quarter fiscal 2018, per Financial Times.

However, the company lagged Spotify’s (SPOT - Free Report) global premium subscriber base of 87 million, which grew 40% year over year in third-quarter 2018. The company’s monthly active users (MAUs) were 191 million, up 28% year over year. Additionally, Spotify added 4 million new premium users sequentially.

Moreover, Spotify moved a step ahead by partnering with Ancestry. The partnership will allow the music company to provide users with a personalized playlist based on their DNA.

Nevertheless, Apple, carrying a Zacks Rank #3 (Hold), is expected to bank on partnerships and loyal user base to get an edge over Spotify and boost its music service market reach. This will eventually boost its service revenues (15.9% of sales).

You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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