In-depth: Will Spotify be able to recreate its international success in India?

Growing ecosystem, developing smartphone penetration, and evolving consumer segments towards paid content have attracted several international players to the Indian digital market. The latest entrant to the market is the Swedish digital company Spotify who has seen vast opportunities of connecting to active internet users in the country.

It took almost one year for the streaming service to launch in the market. When asked about why the company decided to launch the service now,  Amarjit Batra, Managing Director, Spotify India, said, ‘‘India is a huge market, and we believe that we have debuted here at the right time, given the size and health of the music industry, the growing creator ecosystem, developing smartphone penetration, and evolving consumer segments towards paid content. We are here to grow the music streaming market and collaborate with artists and creators to make that happen. This, coupled with our consistent pursuit to build the best possible music service that we can through a localised India interface, playlists and more, will enable users to discover and enjoy more music in an intuitive manner."

Globally, Spotify is reckoned as one of the companies who revolutionise the music streaming industry, but in India, it is one of the late entrants in the burgeoning digital market. Currently, the market has top-notched national and international players such as Gaana, JioSaavn, Amazon Prime Music, Apple music  Hungama, Wynk and Vodafone-Idea who have already attracted consumers interest. In a market where not only the competition is fierce, but monetisation is also a huge challenge, will Spotify India be able to create its own space amongst the consumers?

According to industry experts, the Indian audio streaming market has space for all players to grow in a healthy manner.  The IMI Deloitte report stated that the user penetration of music streaming services in India stands at 6.4% and is poised to grow as smartphone penetration increases and more users subscribe to data services. Digital music revenues are also said to have shown steady growth — from 51% in 2013 to 78% in 2017.

Jehil Thakkar, Head, Media and Entertainment, partner, Deloitte, said, “ Good thing about the India market is it is such a large base that it has room for several players and every player can have mass of 50-80 million users. I don't think it is an overcrowded market, and I think there are a separate set of value propositions, addressing a different segment of India market.”

Though the digital market is pegged to be growing at an alarming rate, the industry is losing $250 million due to piracy. In an industry where monetisation and stream ripping websites are responsible for the revenue leakages, what will it take Spotify to become profitable and create it space despite competition?

Sujata Dwibedy

Sujata Dwibedy, Executive Vice President and India Head of Buying and Trading, Amplifi, The Media Trading Division of Dentsu Aegis Network, said that Spotify needs to be nimble and read the pulse and start. “There is a huge opportunity for them even if they are entering late in the market. They will have to be open to innovations and showcase their uniqueness quickly to the industry. It is critical that they create awareness fast through all media and reach out to the right audience. They need to talk about their offerings and engage with the audience instantly. In an era where content is key, what will matter is, what is it that people want to listen to, the platform will become irrelevant. If good music is being played at Spotify, and it is promoted well (like Gaana did), it would click for them in the market. Critical for them to amplify the 3 Vs- voice, vernacular and virality,” She said.

Siddhartha Roy

Siddhartha Roy, COO of Hungama Digital Media,  revealed that last year they recorded a 48% increase in their user base. However, the growth in the user base was noted at the back of regional markets and non-Hindi languages. “Almost 48% of our users consumed content in languages besides Hindi. Going forward too, regional users are going to drive growth and will be the focal point for all platforms in India. It’ll be important to offer these users content and features that enhance their experience,” he said.

Thakkar also commented that there is a huge need gap on the regional front as the regionally focus players are missing. The music catalogue offered by Spotify will play a critical role in its success. Globally, the app adds around 30,000 new tracks and has paid €10 billion to rights holders since its launch in October 2008. 

Thakkar said, “They have a strong global portfolio, but they will have to build a significant portfolio as well. Their portfolio should comprise of Hindi as well as other regional languages. Once that starts to happen then things like recommendation engine playlist will come into existence but the core is the music catalogue which will come into play.”

Dwibedy added that the library of music that Indians listen to ranges from hardcore Indian genres to International playlists. Spotify needs to widen its library and make it suitable for everyone.

Spotify has launched with a music library of three billion playlists comprising of 40 million songs from various genres of Indian and International music. It has redesigned the music experience for India with a fresh set of exclusive features. Keeping in mind the diverse languages spoken in India, the app offers multi-language music recommendations. Indian users can select their preferred languages to receive a tailored daily mix, home, radio, search results and recommendations.

The streaming service has kept in account the hybrid revenue model of the market and has employed advertising as well as subscription revenue. For the first time, Spotify offers the option of free music streaming service and has opened up for advertising for brands with OnePlus, Brand USA, and Anheuser-Busch InBev as launch partners. In terms of the subscription model, the premium upgrade is available as a pay-as-you-go option for Rs 13 a day, or a monthly subscription of Rs 119 per month. The premium upgrade offers ad-free on-demand music on the computer, phone and tablet. The service provides a month’s free trial for first-time users.

While the subscription plans are attractive, Thakkar said that currently for any new players the challenge is of differentiation and pricing. "India market is still value based, and very ad driven rather than subscription driven so monetisation will continue to remain a challenge for not just Spotify but any audio streaming market in India," he said.

Roy also voiced the same concerns when it comes to the gaining profits, stating that though the industry has grown tremendously and is expected to grow even further, they will need to work towards devising newer models of monetisation and move beyond advertising and subscriptions.

In an ecosystem, where the majority of music streaming services are struggling to make a profit mainly due to the high cost of royalty imposed by record labels on online music services, it is left to see if Spotify succeeds in repeating its global success in India. Globally, Spotify enjoys 96 million paid users of  207 million active users,.

However, with the strong music catalogue, it is obvious that Spotify’s launch has posted a strong competition to existing online music streaming players. When asked how Hungama is planning to maintain its hold on the market, Roy said, “Over the last year, we strengthened our partnership with Xiaomi and offered Hungama Music on Mi. Besides this, Hungama Music is now available on Alexa. We have recently started original audio programming in regional languages beginning with the Tamil show, Endrendrum Punnagai. Additionally, our unique features like Hungama Rewards that allow users to earn points as they consume content and redeem these for premium services, and dynamic lyrics that allow them to have a more immersive experience, have been appreciated by the listeners. At Hungama Music, we have always believed in providing our users a multilingual and multi-genre library along with enriching features and will continue to do so.”

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