How Apple can overcome dropping iTunes revenue

Although Apple’s software services are a drop in the bucket compared with its iPhone business, analysts believe they can boost the company’s total operating income by as much as $US4 billion by 2017.

Based on Morgan Stanley Research data charted for us by BI Intelligence, new services, including Apple’s mobile payments solution Apple Pay, will provide more sources of software revenue for Apple over the next three years. So, as revenue from iTunes continues to decline — as it has since 2011 — Apple will be able to rely on more lucrative services to improve year-over-year growth in this category.

As far as other services, Morgan Stanley also expects Apple to launch a streaming music service to compete with Spotify, which could add $US6 billion of services revenue and nearly $US1 billion in operating income, according to the firm — that’s considering Apple has a much bigger installed base than Spotify, but also assuming Apple’s subscription fee will be $US3 less per month than competing services.

NOW WATCH: Star Analyst Gene Munster Has A New Prediction About The Apple Television

NOW WATCH: Tech Insider videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.