Last week the Financial Times reported
on the increased tensions between major labels and Spotify over its direct artist deals. The report centered on major labels starting to play hardball in the India, a markets Spotify hopes to launch and tap into over the coming years. Daniel Ek in the company’s Q2 call even mentioned that movement into India was moving slower than expected but reiterated that getting licensing deals across major and local labels in countries isn’t always easy. Not a lie by any means.
Now like other big ticket music business news this wasn’t a brand new story. Music Business Worldwide reported on this fissure back in June as soon as the first direct licensing deal was reported in Billboard. Tim Ingham wrote
MBW is told that Spotify plans to roll out its service in India – first in beta, and then publicly – in the coming months. This, we understand, will be the first step in Spotify’s next stage of global expansion, something the company’s Wall Street watchers are understandably very keen on. After India, in order, Spotify is looking to land in South Korea, then Russia, and then to ramp up its presence in the Middle East and Africa. To fulfil this roadmap, however, Spotify’s going to need territorial licenses from the Big Three. And, right now, those licenses are not forthcoming.
Now do I think that Spotify and the majors won’t come to some agreement within a matter of time? Of course not. They’ll find a way to make this work, because there are over a billion people in India and potentially hundreds of millions of future music consumers. That’s too money to potentially pass. Still this rather public airing of grievances gives an opportunity to ask a question that’s lingered in my head for a while: How will Spotify approach a market where it isn’t first, second, or even third large music streaming option?
I’ve mentioned before
that while some of the biggest individual artists on YouTube are Latin American artists like Ozuna and J Balvin, YouTube’s biggest music channels are all based in India. According to social media analytic site SocialBlade two of the five most popular YouTube channel are Indian music channels. And I’m not talking about Ed Sheeran numbers I’m talking about daily views of over 100 million.
Those kinds of numbers always make me ask what is going to be Spotify’s offering in this space to appeal to all of those people consuming music on YouTube. Yet that isn’t at all the only company already trying gain control of Indian music streaming.
Earlier this year the Indian telephone company Reliance, who own the music streaming service JioMusic, announced it was merging with Saavn
, another music streaming app. Except where JioMusic is connected through a phone plan, Saavn is much more like Spotify and can be found across platforms and also hosts its own web browser. Not only did this partnership present a stiff challenge to Amazon Prime Music that recently launched in India, but also against Gaana, another Indian music streaming platform that just happens to be owned by India’s biggest media company the Times Group. This isn’t to mention that Apple Music and Google Play Music, which are also offered in the country. Not exactly light competition for Spotify.
This is where my speculation begins, because I’m sure the battleground of India over direct deals is simply because it’s a market Spotify still hasn’t entered and thus major hold a much stronger position to fight. Yet, I wonder how much they were assessing the situation on the ground in the country, where there are already three major local streaming services, one with a major telco company and the other a major media company, along with the other big three western streaming services and thought “This could be battle we could potentially win.” I’ll throw scare quotes around “win” and reiterate I think a deal will be hashed out, but as the music industry is rebounding there does appear to be a bit more of a swagger with labels at the moment.
Yesterday in unsurprising news Troy Carter, Spotify’s public face to artists announced he was going to be leaving the company. Though the small in details this from the Bloomberg piece stuck out to me
Carter’s departure creates a vacuum just as the company is about to enter a new round of negotiations with the three major record labels. Spotify has sought to reduce the rate it pays to labels so that it can one day be profitable.
Carter’s opening got filled rather quickly by Nick Holmstén, Spotify’s former VP, Global Head of Shows & Editorial. The question that’s now lingering increasingly in my mind is what do labels want out of Spotify in these next rounds of contracts. I think the existential concerns of over direct deals will never go away because that’s the devil’s bargain, which the music industry agree to in return for seeing their profits rise. So, I don’t want to blow anyone’s minds here but even though last quarter Spotify saw increased growth in premium to the detriment of its free tier, when they do make inroads in India that’ll be on the back of free users. And how does Spotify make money off free users: Advertising. What’s gonna be interesting to me is just how much does a Spotify streaming in non-western pay on the free tier? How much will it be paying when they do eventually launch in India?
One advantage Spotify had in markets like the United States, Latin America, and many European countries was that it was the first fully supported and legal music streaming app to enter the market. Of course Pandora and YouTube existed, along with other tried and failed attempts at legal music streaming, but Spotify to their credit made the concept mainstream.
India doesn’t contain the same vacuum. There are already numerous apps that offer music streaming and again a platform like YouTube is seeing 9 figure streaming numbers a day on a single channel devoted to Indian music. That’s to say there is certainly an audience but even without majors trying to slow its progress I wonder how success Spotify could be in this market. Daniel Ek always says there can be space for multiple music apps, but I always wonder if down the road how many app people will support that can truly offer unique content.