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Global music streaming platforms tune in to capture the India market

Less than 1% of music streamers in India pay for the paid subscription, but that is about to change.

In a span of three weeks, between May and June, Saregama—one of the oldest music labels in India—entered into agreements with global music streaming major Spotify and social media giant Facebook, allowing their users to play music from its catalog of over 100,000 tracks.

The two most recent deals are indicative of a growing interest in India’s audio streaming market, which is estimated to reach USD 400 million by 2023.

Shaking hands with Saregama is more critical for Spotify than it is for Facebook, as the Swedish music streaming giant fought a legal battle with Saregama in April 2019 and had to take down all its songs from its library. In its bid to grab a pie of 200 million Indian music streamers, having Saregama by its side is imperative for an audio streaming company like Spotify, which just entered India earlier last year.

Amarjit Singh Batra, managing director at Spotify India, told KrASIA that although Indian music streaming industry is young, the company is excited by the high potential to grow the market. “Spotify is still in its very early days in India right now and delighted with the journey we’ve made here so far,” Batra said in an email interview. “India is a growth market for Spotify,” he said, adding that the company is here to stay for the long haul and develop the audio streaming industry.

Over the last couple of years, India is slowly becoming a hotbed for global music streaming companies that are looking to expand their roots in the world’s second-most populous country. Following Spotify’s step, YouTube Music, also entered the India market which according to people in the industry is slated to have over 350 million users by the end of this year.

During its Q1 2020 earnings call, Spotify told investors that it added over two million monthly active users (MAUs) in India, following its launch in last February. If compared with how it faired in the ‘Rest of World’ market comprising of 14 countries such as Japan, Thailand, Malaysia, South Africa, Israel, Vietnam, Romania, and others, a little shy of two-third of 3.4 million new MAUs came from India.

Image credit: 123rf.com.cn.

Analysts believe, the dirt-cheap internet data plan launched by Reliance Jio in September 2016, brought millions of new users online changed the roadmap of global music streaming companies. While YouTube Music launched in India a month after Spotify, Amazon Prime Music came to the country early in 2018.

“These global audio streaming companies have a huge growth potential in India as they expect a lot more smartphone users to start using music streaming platforms in the next five years,” said Satish Meena, senior forecast analyst at Forrester.

Holding the fort

At a time when Spotify and YouTube Music are quickly gaining ground in India, the local incumbent players such as Times Internet and Tencent owned Gaana, Reliance’s JioSaavn, Hungama Music, and Bharti Airtel’s Wynk are ready to put up a fight.

One of the early challenges for foreign online music companies would be how to localize their content, platform, and the user interface for Indian users, according to Meena. He believes that YouTube Music would benefit from the popularity of its much older, flagship video streaming platform YouTube, which has been in the country since 2008 and has amassed over 265 million monthly active users. This, according to him, would certainly give YouTube Music an edge over Spotify.

“As companies move beyond metro cities and go into tier 2 and 3 markets, global music would not get them deep penetration rate. So, they will have to bring variety to their library and localize it,” he said.

Spotify’s Batra said his company is leaving no stone unturned to ensure its product reaches across markets and in languages that matter to listeners. “We offer the latest music in as many local languages as possible,” he said.

The Swedish streaming giant isn’t the only one trying to pull off the localization trick, though. Gaana, an Indian music streaming startup backed by Tencent, also claims “a huge understanding of the kind of music that gets produced in the country”.

“I think home players are strong enough to hold the fort. Collectively, Gaana, JioSaavn, and Wynk, have a significant chunk of users who’d continue to choose us, because we have better catalog of songs,” Prashan Agarwal, CEO of Gaana, told KrASIA.

Gaana has garnered over 160 million MAUs, Prashan told us. According to media reports, its local counterpart JioSaavn has a little north of 100 million MAUs. Spotify didn’t reveal its subscriber numbers for the India market. Its total MAUs globally grew by 31% year-on-year to 286 million, Batra said.

Batra said one of the reasons Spotify has stayed ahead of competitors in the global market is because of its approach of keeping users and creators at the heart of all its innovation. This, he said, has led to the “features that are strongly backed by algorithms, research, and what the users want. We continue to evolve the experience we provide on the platform.”

Spotify, music streaming
Amarjit Singh Batra, Managing Director – India, Spotify. Courtesy: Spotify

Although, with its partnership with Saregama and other similar Indian music labels, Spotify has enough local content to offer to its users, Meena and Agarwal, both believe foreign audio streaming companies would require more than this to claim new users.

Meena said, “anyone with a deep pocket can buy music licenses, that’s not a key differentiator. One has to have a robust recommendation engine that understands listeners’ tastes in music.”

Batra stresses that Spotify leverages technology to deliver a truly personalized audio experience which is unique to every user.

According to Agarwal, Spotify and YouTube Music would take at least two years to understand Indian’s taste for music which varies from one region to another—not just in terms of language but genre. “Global platforms have a lot of catch up to do to learn the kind of music Indians listen to and then personalize their recommendations based on that,” he said.

In February 2018, Chinese internet giant Tencent invested USD 115 million in Gaana to increase its share in the Asian digital music industry. Gaana used the funding to develop an in-house artificial intelligence tool to boost its personalization and recommendation feature. Gaana claimed its recommendation and personalization features contribute 24% to its overall consumption.

The decade-old company started to focus on regional music in 2016 with a special focus on Punjabi songs which is known for its upbeat and energetic music. “In the regional music streaming space, Punjabi songs steal the show and we lead this segment. We are almost two to three times ahead of our competitors,” he said.

The company claimed, ever since it started to focus on regional content, its consumption has increased from 8% in 2016 to the current 35%. To be sure, Indian music industry is dominated by Bollywood songs which is largely in Hindi.

Other than focusing on regional content, Gaana and other local players like JioSaavn have also invested a lot on creating original content in the podcast segment. Gaana is working with local content artists to list their songs on the platform. It said these two initiatives would be a big driver to promote non-music as well as non-film content on the platform.

Playing to their strength

Gaana is working on increasing the number of tracks India produces on a yearly basis. Agarwal said India could do with more tracks, as Indian film industries create less than 1,000 songs in a year, shadowed by the over 100,000 songs released in the Western markets. “The reason for that is there is no market for non-film music promotion. I am seeing other local players also taking steps in this direction. Non-film music is the only way to create a healthy sustainable kind of music industry in the long term,” he said.

While Gaana has started building its muscle for non-music original content, Spotify is well stocked with such tracks globally, and is now doubling down in India as well. Spotify launched three ‘Originals’ late last year and 12 more this year. “All our Originals feature local talent…we continuously analyze what our users are listening to, and develop Original podcasts that our local users relate to, and want to engage with,” Batra said.

Spotify is seeing interesting developments in terms of how Indian users’ listening habits are changing. “There is an increased awareness and interest in streaming podcasts, predominantly in the motivation, self-help, and news genres. And finally, users are also becoming creators, whether it’s to create playlists on Spotify, or their own podcast,” Batra said.

Meena said that although India has multiple music streaming platforms, they are not going after the same set of users. He sees different strategies at play, where local platforms like Gaana and JioSaavn are aggressively going after first-time music streamers in smaller towns, Spotify is exploiting its existing strength of having a robust library of western and international music.

Music streaming
Courtesy: JioSaavn

“Spotify is not looking at adding new users, but instead is targeting English music listeners who are already present on other platforms to migrate to Spotify. People looking for international music would certainly choose Spotify over Gaana and Saavn that are better known for their local content,” Meena told us.

After more than a year of its presence in India, Batra still sees enough interest among users to discover new kinds of music. “Users are open to discovering more music—right from K-Pop to independent, and from Latin to lounge; all of this, in addition to film music, which continues to be extremely popular,” Batra said.

Seeing the growing internet population in India, Chinese app factory ByteDance launched Resso earlier this year in India. ByteDance touts it as a social-based music streaming app in addition to audio streaming, it allows users to share lyrics and comment about a song. “Resso’s user interface is completely different than others in the market. They are targeting users who are not looking for a specific music but rather, who are browsing for music,” Meena explained.

A run for paid subscribers

People in the industry said YouTube would give a tough fight to all the players as it has deep penetration in metro cities as well as in smaller towns and has a better brand recall. YouTube brought its two music streaming platforms—YouTube Music, which is ad-supported, and YouTube Music Premium for the users who choose to pay. A Bloomberg report said YouTube Music has more than 800,000 paid subscribers in the country.

The fact that a large number of Indians listen to music through pirated means has not deterred music streaming companies to launch their paid subscription plans in the country.

Audio streaming players are pinning their hopes on the new users who they believe would see the value of streaming music and eventually pay for it. A cheaper internet connection and increased smartphone penetration have already made a dent in the audio piracy market which recorded a downfall in illegal downloads from 76% in 2018 to 67% in 2019.

“For the industry to be mature and healthy, it has to grow in volume (number of users) and value (users who are willing to pay for music),” Batra said. According to Deloitte and the industry body Indian Music Industry (IMI) less than 1% of music streamers in India opt for the paid subscription, which Agarwal from Gaana hopes would grow up to 8% in the next three years.

With Indian users not willing to pay for music, Spotify said it has brought unique pricing for the country compared to its global pricing strategy. “We came in with a strategy that catered to those who wanted offline, ad-free streaming for just one day, or a week, or a month, or even the year. India was also the only market where we made free-on-demand music available, which meant that listeners on the free tier could stream any song they wanted, as many times they wanted,” Batra said.

Startup

Read this: ByteDance reportedly has more than 100 people working on a Spotify-like music streaming app

A Statista report projects revenue in the music streaming segment to reach USD 393 million by the end of this year.

The entry of Spotify and YouTube Music last year marked a price correction in the market. To compete with these two music OTTs, both JiSaavn and Gaana slashed their annual subscription rates from INR 999 to 399 (from USD 13.11 to 5.24).

“We realized users were not receptive to the price point of INR 999 for a year, which we think was a pretty steep offering for the Indian audience,” Agarwal said. He claimed out of 160 million users, a low single-digit percentage of subscribers pay to listen to the music on Gaana. “Once we reduced the price to INR 399, we are seeing a huge uptick.”

Gaana is hoping to replicate the China success story in India by bringing Tencent on its cap table, as the latter has a deep understanding of the digital music streaming market in Southeast Asia through its other investments via its subsidiary Tencent Music Entertainment (TME).

Agarwal claimed the subscription penetration in India is growing on the same trajectory as China’s was a decade ago. Indian digital music subscribers are expected to cross 600 million in three years from the current 200 million.

In the current scenario when users have tightened their purse string as they deal with the pandemic, audio streaming platforms are rejigging their subscription offerings. While Spotify is extending its free trial period from one month to three months for new paid subscribers, Gaana is looking to create different price points for users depending on what paid feature they want to use.

“We are in the midst of decoupling our plan, where we create a ladder structure. Users can choose if they only want to have ad-free music listening experience without the download feature. These mixes and matches of paid features would come at different price points,” Agarwal said.

Compared to the Indian music streaming market, China has a much-evolved market where users are comfortable paying for the service. Gaana’s backer Tencent, in its financial statement for the year ended 2019 said its online music paying users grew to 39.9 million. A bulk of the company’s revenue comes from social entertainment features like karaoke.

“China is a karaoke-first market, while Indian audience is not very big on it. One reason is music listening is largely a passive activity for us which goes in in the background while we go on with our work. About 85% of users don’t look at the screen when they listen to a song,” Agarwal said.

He believes, as more players come in the market, paid subscription would eventually start seeing an increase in India, which is currently dominated by free listeners.