For Spotify, gaana alone doesn’t pay – know what is playing

Given that Indian music lovers would rather have it for free, Swedish music streaming company Spotify’s India business is understandably heavily skewed towards advertising. Accepting they will have to rely on advertising instead of subscriptions for revenue, the app is opening up its platform to mass brands in the country, with a focus on segments like FMCG, retail, lifestyle and entertainment that audiences are more conversant with. The firm already counts brands like Pizza Hut, Coca-Cola, KFC, Subway and Mondelez as its clients.

“We have scratched the surface but want to enlarge that pie. We are not here to offer Spotify only for a premium audience,” Arjun Kolady, head of sales at Spotify India, told FE in an interview.

“India will primarily be an ad-supported market for us. We do not expect a similar number of users to be on subscription in India as in the global markets,” Kolady said. He said globally, about 54% of its users are on ad-supported model, a tad higher than paid subscribers. Spotify has 248 million users, including 113 million subscribers across 79 markets.

It is not easy to make Indians pay for listening to music, especially when YouTube (the video app) caters to all your musical whims, from The Beatles to Bollywood, for free.

A KPMG report released earlier this year said while advertising contributed around 90% of music streaming revenues in the year till March 2019, paid subscriptions accounted for the remaining 10% or Rs 1.2 billion in absolute terms. From about 110 million users in FY18, audio streaming’s user base increased to an estimated 165 million in FY19.

For the first three months following its launch, Spotify had an exclusive deal with only three advertisers in India — Budweiser, One Plus and Brand USA. It started signing up more brands in June, having sealed deals with 75 advertisers so far. Currently, the cost of a 10-second advertising on music streaming apps ranges from Rs 150-Rs 250 CPM (cost per thousand impressions.) “The start was clearly millennial brands looking at an exclusive audience.

Over the last couple of months, we have seen that large-scale, typical mass brands are also being active,” says Kolady. As per company data, the platform saw considerable traffic from states like Bihar, Jharkhand, Rajasthan and Chhattisgarh during Diwali.

Spotify, whose India launch took place amid a legal battle with Warner Music, had claimed it notched over a million users in less than a week of its operations. But now, notwithstanding Spotify’s brand pull that readily clicked with the younger generation, it seems the firm is losing subscribers to YouTube Music Premium that entered the market in March along with YouTube Premium service — a recent Bloomberg report said YouTube garnered over 8 lakh subscribers for its paid services.

“Spotify lacks depth in terms of content when compared to other players like Gaana. Also, the Indian audience is quite familiar with brands like YouTube and Amazon. That is the reason we see a YouTube Music and an Amazon Prime Video gaining traction,” said an analayst on condition of anonymity.

Spotify also had to delist nearly 1 lakh songs licensed from Saregama after talks to negotiate a deal failed, according to media reports.

Globally, advertising forms about 10% of the firm’s total revenues, but Kolady claims in India the ‘number would be very different’. “India’s streaming market is in its infancy…also, it is a very crowded market for streaming both audio and video,” said Jehil Thakkar, partner at Deloitte. Some brands may be strong globally but have high recall only in a small section of urban India, he adds.

Source: Financial Express