Why you should care
As Spotify continues to expand globally, smaller music streaming platforms in Africa, Asia and Russia are ready to fight back.
A red bus idles on a street in Nairobi, and people pile inside to find red, music-themed decor filled with TVs playing music videos. Local streaming giant Boomplay Music is taking some of its most loyal Kenyan fans to Paintball Fury, where they’ll go head-to-head with Boomplay staffers. The outing is one way the company engages with the users who’ve made it the most popular music streaming platform in Africa.
You wouldn’t know that by looking at a chart of the music streaming industry’s global revenues, where Spotify (a Swedish provider) and Apple together make up more than half the market, at 32 and 19 percent, respectively. But that’s because they’ve cornered the U.S. market, which remains by far the largest international market for paid music streaming — raking in $4.3 billion compared to the second-largest market, China’s $820 million. Now, as Spotify and Apple look to replicate their success in emerging markets, they’re coming up against a band of local market leaders who are using everything from protectionism to dramatically cheaper prices to try to stymie the global kings. If other industries — from e-commerce to ride-sharing — are any indicators, Spotify and Apple may need to copy from their new rivals to beat them.
In India, where Spotify launched in February, it’s up against JioSaavn and Gaana, local music streaming platforms that boast 100 million and 80 million subscribers, respectively. The Swedish firm registered 1 million subscribers in its first week — but maintaining that momentum will prove a challenge, say experts. Whether for electronic goods, clothes and music, India’s a price-sensitive market. To capture India’s $150 million music streaming market, Spotify is offering an ad-free monthly subscription of $1.67 — far lower than the $9.99 U.S. rate. But that’s still more than six times costlier than JioSaavn’s $0.30 per month subscription plan.
We’re confident we can hold our ground
Phil Choi, Transsnet Music, owner of Boomplay
Russia, where Spotify plans to launch later this year, won’t be any easier. UMA Music, founded in 2014, provides music licensing for two major social networks, VKontakte and Odnoklassniki, there, and for UMA’s own mobile app, called BOOM. They’re the largest music streaming platforms in Russia and the former Soviet republics, with millions of people listening on social media and around 2.2 million paying subscribers. JOOX, owned by China’s Tencent, controls a lion’s share of the music streaming market across major Southeast Asian economies such as Thailand (56 percent), Malaysia (46 percent) and Indonesia (34 percent). Within China, of course, Tencent’s multiple services control the market.
And in Africa, Boomplay is the rival Spotify will need to beat to dominate the continent. The company boasts the largest library of African music in the world. Launched in 2015 and purchased by Chinese-owned Transsnet Music in 2017, Boomplay now has 46 million users and gains 2 million more each month. Spotify, already in Algeria, Egypt, Morocco and Tunisia, recently entered South Africa too — for the moment staying out of the way of Boomplay, which counts Nigeria, Kenya and Ghana as its main markets. Both firms know they’ll need to enter each other’s markets soon, but Boomplay’s executives say they’re ready.
“Competition can be good sometimes,” says Phil Choi, head of international acquisition and partnerships for Transsnet Music. “We’re confident we can hold our ground.”
That confidence doesn’t come only from an early mover advantage. In Malaysia, Spotify first launched in 2013, two years before JOOX, but trails the Chinese-owned service. In Indonesia, where it entered in 2016, it’s not in the top three streaming services. Apple Music launched in India in 2015 — along with 99 other countries — at $2 per month, but this year slashed the rate to $1.50 for individuals and $0.65 for students after struggling to gain traction.
Instead, these local companies are succeeding by employing strategies tailored to their principal markets. In India, apart from its low-cost model, JioSaavn — which has offices in Mumbai, Gurugram and Bangalore, as well as New York and Silicon Valley — produces music content in 17 languages across 1,000 music labels. It has a search function “that understands phonetics with a wide variety of spellings and misspellings,” says Clint Balcom, the firm’s chief product officer. With vast variations in levels of literacy in India, and 22 official languages, those assets serve JioSaavn well.
In Russia, UMA is relying on a level of social media integration that’s rare on music streaming platforms. While scrolling through VKontakte or Odnoklassniki, “you look for the news, chat with your friends and music is always there,” says Vera Gorbulenko, marketing director at UMA. Unlike streaming services such as Spotify, UMA also allows user-generated content so anyone can put their music on the platform. Sure, this makes for plenty of noise in the space, but it’s also an opportunity for artists to gain exposure. UMA has seen many musicians become popular that way — like rapper Allj and artists Rauf & Faik — just as Justin Bieber first gained popularity in the U.S. through YouTube.
By helping regularize the music industry, Boomplay helped tackle music piracy in Africa. “There are copyright laws, but regulation is lax,” says Choi. “Boomplay came to the market to solve a problem for the industry — getting artists their fair share.” Boomplay also holds in-person workshops where artists are taught how to market and monetize their music. “It’s added value because we help them grow,” Choi says. Like Spotify, Boomplay has a premium subscription option, which costs between $2 and $4 per month and allows users to access more content and downloads. But unlike Spotify, their free version doesn’t have audio-interruption ads. “Ads use up data, and we don’t want to put that on our customers in Africa,” says Choi. The company also has another ace up its sleeve: Transsnet owns Tecno Mobile, a market leader in mobile handsets in parts of Africa. So in Nigeria, for instance, Boomplay comes downloaded on every Tecno Mobile phone. That accounts for 50 percent of the market share in the country. (Apple Music similarly comes automatically with iPhones, but those are much costlier than Tecno Mobile handsets.)
In some ways, Spotify’s expansion could further help professionalize the industry in emerging markets. “Five years ago, nobody was interested in Africa, but we think [Spotify] could help the market mature,” says Choi. And to be sure, their deep pockets mean Spotify and Apple can afford to rough it out initially in new markets. “Spotify holds a large amount of capital which is readily available [for] advertising in new territories,” says James Dyble, managing director of Global Sound Group in London.
But the challengers they’re up against aren’t lacking in resources either. JioSaavn is the outcome of a 2018 merger between Saavn, which was a streaming app, and Jio, India’s largest telecom network. In April, Boomplay raised $20 million in funding. These companies are now also targeting the West. JioSaavn has a subscription option for $22.45 for six months or $38.99 for one year, if you’re in the U.S. The platform is available worldwide with the exception of their English content, which is only available in India, the Middle East and North Africa.
And back in their home markets, local networks matter, says Dyble. “Streaming platforms in certain countries have licensing deals with many major labels and publishers, which gives them access to more material,” Dyble says. “Spotify may struggle to get hold of similar licenses.” Indeed, that struggle for licenses delayed Spotify’s entry into India, and the road ahead won’t be easy. “There’s no doubt [India] is a very challenging market, with a steep learning curve and a lot of peculiarities that aren’t obvious until you get into the trenches,” says JioSaavn’s Balcom.
Without licenses for local artists, Western streaming platforms will struggle — both Choi and Balcom confirm that local content is their principal driver. “Under the hood, it’s all about an authentic, localized experience,” says Balcom.
For once, Spotify and Apple will need to play catch up.
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