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Penny Fractions: Why Spotify Will Struggle in India

Hello, hello. This week is a rather packed newsletter so I’ll keep this brief. I planned this week to
Penny Fractions
Penny Fractions: Why Spotify Will Struggle in India
By David Turner • Issue #65 • View online
Hello, hello. This week is a rather packed newsletter so I’ll keep this brief. I planned this week to be about India and the broader southeast Asian music market, but all of the news last week with Spotify and India realigned my focus to center on India. However, I’ve enjoyed these regional dives so I’ll hopefully catch places I’ve overlooked another week. So with that out of the way, let’s get to it.

The Stories We Tell Ourselves
A company needs a story. The Spotify narrative is one of constant growth and that once it achieves a certain level of scale it’ll be a real professional company, maybe even one that makes money. This can be seen in reports that envision the company hitting 300 million users by 2021 or the investment bank GP Bullhound who projected Spotify to get 200 million paid subscribers by 2020. Ek and his PR team want Spotify’s at the center of the music industry’s growth story, but the last few months is starting to cloud that vision. 
The conflict reached into various reports discussing the eventual arrival of Spotify in India. Variety reported that the launch was on pace to happen in the next six months; Music Business Worldwide then said all major labels weren’t quite on board and alleged Spotify was rushing the deal with this news; yet Bloomberg also discovered that Spotify already secured deal with with Indian companies. The stories magnify how many moving parts were going to be involved in such efforts and could explain that as Di Digital reported Spotify sought to buy one of the big Indian streaming services possibly to avoid all of these hassle and to gain a quicker leg up in the region.
All of this noise just highlighted an issue I’ve held with Spotify for most of 2018, as the data started to show this fact. Spotify’s biggest markets: United States, Brazil, Mexico, Germany, the United Kingdom, and a couple other major European and Latin American countries hold up a large majority of Spotify’s user base. This is what Tim Ingham at Music Business Worldwide observed last week in examining how little of Spotify’s recent growth was in Asian markets. The pattern appears fairly obvious: Where Spotify was early to market and was able to build on smartphone growth it found success, but in markets with more competition for those same smartphones notsomuch. This issue for Spotify in India is primed to follow, not buck, this trend.
Spotify Isn’t First, Second, Third, or Even Fifth in India
The two big local players Spotify will face are JioSaavn and Gaana. Now JioSaavn is a newly minted combination of JoiMusic, which began distributing Bollywood content into the United States back in the mid-2000s and is controlled by one of India’s biggest telco companies Jio. According to Telcotalk JoiMusic, before the merger, had been growing consistently over the last year and half, and so has it’s telco parent company that boasts over 250 million users; while Saavan, which offered both free and paid version of the app that is now going to be phased into a paid option for the new product.
The other company is Gaana with over 80 million monthly users, which is more than Spotify has in any single country at the moment. Gaana isn’t a new player to this space as the company started in 2010 but according to Prashan Agarwal, the company’s CEO, in a recent interview with Quartz the company started to see massive growth through its app and adoption of smartphones in 2015. This parallels Spotify’s experience in Latin American markets. The piece even highlighted how Google Trends shows Gaana as the most searched music streaming platform. The financial situation of the company is also interesting, as it’s owned by Times Internet, India’s biggest media company, and received a $115 million investment in February by Tencent. The same company that swapped stocks with Spotify last year and who I mentioned last week an investor Anghami, the biggest Middle Eastern music streaming platform.
Now there are other players beyond JoiSaavn and Gaana. There is also Hungama Music and Wynk, which is owned by the teclo company Airtel. I won’t dive too deep here, cause I’ll be swimming too far from what I know, but I found this Livemint article interesting as it was highlighting the rise non-Bollywood music across Indian streaming services as more people are getting online. Though Spotify is reportedly in active talks with companies like Times Music, Eros International, Zee Music, and T-Series, I wonder how many regional niches the company will realistically be able to go down.
I’d be remiss not to mention that Amazon Music launched earlier this year and that the cost of Amazon Prime, including Music and the other features, is cheaper than Gaana, JoiSaavn, and Apple Music, which is also in the market. So far there is little data of how Amazon Music is doing in the market, but I’ll be interested in how much Spotify will try to charge once in the market considering there is already stress on the company on not making enough person user. O, I forgot…there is still one company I should mention.
F’cking YouTube
I’ve personally found it a bit funny seeing all the recent stories highlighting the record label T-Series and its highly success YouTube channel. The reason I find it funny is that T-Series isn’t on the rise, it’s been the most popular YouTube channel in the world for some time now, it’s just the metric people notice (Followers) is showing this fact. The channel scores over 54 million views a day. I remain increasingly skeptical of nearly all streaming stats, but when the next closest channel is at 28 million views a day, there is little reason to question the impact of T-Series.
T-Series is popular, but it isn’t an outlier. According to Socialblade a number of the biggest YouTube music channels (Zee Music Company, Wave Music Company) in the world are based in India. Many of these channels are post Bollywood music, which is massively popular and though I’m sure Spotify will put money towards vertical Indian music videos, YouTube’s advantage in that space isn’t going erased with a few playlists.
When I wrote about Spotify and India back August I wrote I wasn’t too keen on the company’s chances in this new market. My end of the year addendum is just as bleak. It’s already so far behind most local players. Amazon Music certainly will probably be cheaper. YouTube is fucking huge. And, a small detail in reporting last week was Variety saying Spotify hold no plans to partner with a telco. Well considering much of Spotify’s success in Latin America was tied to smartphone growth and telco deals, I don’t see any path for the company beyond just giving away the product for free and JioSaavn just announced it’ll be giving away their premium product away for 90 days to Jio users—cause you know telcos. I’m not a PR person, so I’ll be blunt and expect to see a lot of pomp around Spotify’s India launch and very little concrete results.
6 Links 2 Read
I’ll be entirely honest I didn’t realize this was happening?! The story details that a number of YouTube creators aren’t thrilled by this, which is understandable as they’re struggling to monetize their content and YouTube is now pushing them to do more content they won’t be compensated.
Speaking of new features…I’ve written about this so much that I won’t repeat myself, but when will one of the major streaming services start to go down this path.
I always feel a bit mixed about putting news about piracy here cause there is always so much piracy news…but I wanted to put this here, because I do think we’re going to have to start talking about piracy in bigger ways than we have the last few years.
I know of a few of y’all are really into following this kind of stuff, so I thought I’d drop this here as Apple appears interested in diving into an oft overlooked market within music streaming.
One of the first topic I should plan to cover is what Apple’s been doing in the music space the second half of this year, because the words Apple and radio are about to be said a lot more together.
Super excited to start getting PR blast emails about an artist being signed off a TikTok video challenge. The app seems cool and fun, which means I’ll be awaiting its turn into a swamp of filth in 18-24 months.

The Penny Fractions newsletter arrives every Wednesday morning (EST). The Penny Fractions artwork was done by graphic designer Kurt Woerpel whose work can be found here. Any comments or concerns can be sent to pennyfractions@gmail.com. The closer we get to the holiday season some may wonder what to get me for a gift. Chocolates? A magazine subscription? Nah. Just forward this newsletter to someone and you’ll make my holiday dreams come true.
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David Turner

Weekly analysis of the music streaming business.

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