Riding on inexpensive data, app providers are building customisation, such as voice-enabled features, to distinguish themselves in the market
Music lovers in India are spoilt for choice with various music streaming applications flooding the market.
The segment has come under the spotlight following the entry of two international giants — Spotify and YouTube Music — within a span of a month. They will compete with homegrown players such as Wynk, Gaana and JioSaavn, besides international rivals Apple Music and Amazon Music.
Driven by cheap data
India is the next big market for music streaming, driven by factors such as increasing smartphone penetration and low data prices, plus the fact that a large part of the population accesses Internet via mobile phones.
“Streaming has been around for a long time but it was constrained by consumers thinking very hard about how much it was going to cost them, because data charges were so high. In the last two years or so, data prices have dropped almost 90%, so the industry is really coming into its own,” Jehil Thakkar, partner at Deloitte India, said.
A recent report by Deloitte and the Indian Music Industry (IMI) pointed out that the launch of Reliance Jio acted as a ‘powerful catalyst’, leading to a dramatic shift in not only the economics of the Indian telecom industry, but also in the quantum of Internet and data usage in the country. The overall number of music streaming users in India was estimated to be nearly 150 million in December 2018.
“India is a music loving society with consumers spending 21.5 hours every week listening to music, against the global average of 17.8 hours. Helping satisfy this love for music is the audio OTT industry which is at an inflection point today,” Blaise Fernandes, president and CEO, IMI said.
Echoing similar views, Sameer Batra, CEO — Content and Apps at Bharti Airtel, which runs Wynk Music, said, “For a category like music, you and I can be different in terms of what we like listening to, but love for music is fairly ubiquitous. So, there is significant market opportunity out there, which is essentially equal to the number of Internet users on mobiles.”
He pointed out that India has about 400-450 million “serious Internet users… contrast this with the backdrop that the country doesn’t have too much broadband…What I see is an opportunity that doesn’t exist in any part of the world, which is why everybody is trying to get into the India market.”
‘Still at nascent stage’
Stating that these are still very early days for this sector, Mr. Thakkar said, “I think we are in year one of a 10-year journey. We are only just about starting to see large-scale adoption of these applications.”
He said that intense competition was natural for an industry in its early stages, and added that a lot of these apps were working on bringing out originals to woo consumers.
However, Wynk Music is not very kicked up about “exclusive stuff”.
“Some of our competitors have been trying to do exclusives. We don’t think that is the right way to go. We want to do more on the personalisation side rather than trying to buy exclusive content… Nobody knows what will work. What you may think is super hit, may be a dud for me and vice-versa. So, the success of following an exclusive strategy is right now questionable in the Indian context. It is now that the habit is building, so you can’t take very bold and long term bets on exclusivity,” Mr. Batra said.
“The reality is that unlike video, where there is a lot of original content, music supply is pretty much similar… there are only so many songs in movies, etc… The key in terms of unlocking engagement is really about saying within the larger universe of say, 6-7 million songs that exists with everybody, who can customise and personalise the hell out of it.”
‘Potential to transform’
Amazon Prime, on the other hand, is betting on voice-command based features to pursue customers. “Music streaming is entering a new era…We believe voice has the potential to transform music listening,” Sahas Malhotra, director, Amazon Music – India, said.
He pointed out that Amazon Music had integrated voice-based assistant Alexa into its mobile application.
“We are so focussed on voice not because it is new or it is the cool thing. We believe voice removes barriers for people who otherwise find visual apps challenging, or to simply cut the time taken for people to get to their favourite song.”
He added, “Our North Star is that Alexa becomes your music buddy. You should be able to think of it as a friend who will recommend stuff for you, play stuff for you depending on the mood you are in, or help you discover new music.”
The Deloitte-IMI report pointed out that while Bollywood had ruled the recorded music industry for decades, in the past couple of years, demand for more regional language content had risen. In 2016, Hindi film music contributed to 70% of consumption on streaming services such as Gaana and JioSaavn. However, about two years later, this figure has dropped to 50%, according to the report.
It added that consumption of regional music during the time has grown from 5% to 25%. “More penetration to tier 2 and tier 3 cities has led to this shift.”
Mr. Batra agreed. “As penetration of music services goes deeper into the country beyond people in large cities with multiple phones, who have exposure to forms of entertainment… the whole notion of regional content and role of regionalisation and stuff in the mother language of the users starts to play a big role. We are already seeing some massive trends in terms of regional non-filmy content.”
“We are able to see that if you get customers to listen to regional songs in their mother language, then you are able to lock customers to servers in a meaningful way,” he added. Mr. Malhotra pointed out that India was the first market where the company saw people consuming music in multiple languages.
Presently, of the various digital music revenue modes in India, 60% revenue comes from streaming. While paid subscribers provide a stable source of revenue, unfortunately, in India, less than 1% of the subscribers are paid users and nearly 14% are bundled users, as per the report, and the remaining 85% are on free subscription. “This implies 15% of subscribers contribute to 55% of streaming revenues, whereas 85% of subscribers contribute to the remaining 45% of streaming revenues [i.e. ad-supported streaming revenues]”.
As per the report, currently, the cost of a 10-second advertisement on music streaming apps ranges between ₹150 and ₹250 CPM (cost per thousand impressions).
“Therefore, to inculcate the habit of paying for music among consumers, it is critical that audio OTT platforms actively try and convert free users and bundled users to paid subscriptions.” Currently, bundled users pay for music streaming services as part of the data pack charges levied by the telecom service provider.
Mr. Batra said “We have decent scale on it. I won’t say outstanding scale, but the real answer is that right now habit formation is happening. I don’t think there is anybody at a meaningful scale at the moment. But I think that time will come.”
While green shoots can be seen, monetisation will be a long-haul contest in India, he opined. “Early signs of monetisation are still there. It’s not a bleak picture. Are you at a place where cost of investment vs monetisation are evening out, there is some time…as you get deep into the country, we believe monetisation will emerge. The top-end of the pyramid is already paying for content.”
Stating that real differentiation between the companies will be the content, the user interface and the pricing, Mr. Thakkar added that “general category” streaming services will need deep pockets to stay in the game because monetisation today is challenging. “So, you will have to continue to spend on content, new features in your apps without commensurate returns for the medium term. It is almost imperative for you to be a deep-pocketed player.”