Analyst: Apple Music is a tenth of services revenue with much room to grow

RBC Capital Markets analyst Amit Daryanani offered some insights about Apple and its music outlook in a note to investors. By his estimates, Apple Music contributes 10% of the tech giant’s services revenue, while iTunes is responsible for 22%. The estimated gross margins for the two properties are 15% and 25% for Apple Music and iTunes, respectively.

Although Apple Music has grown to 17 million subscribers, Daryanani’s note shows that the streaming service still has low penetration compared with its installed user base at just 3%. This makes the music platform a “very attractive opportunity” for user growth if Apple can push conversions.

Apple’s Q1 financial results did not give any further detail about the performance of its foray into streaming. CFO Luca Maestri simply said that Apple is “the market leader in digital music.” During the quarter, Apple’s Services division saw on-year revenue growth 18% to $7.2 billion.