The launch of UK-based music service Spotify in China promises to offer advertisers a new media outlet: music streaming. At a time when music labels are trying to find new ways to monetise their catalogues, the service has gained a lot of traction in Western markets. Can its model translate to Asia?
1 Spotify is an ad-supported music service that allows users to stream songs and create playlists in exchange for listening to ads. Founded in Sweden but headquartered in London, it launched publicly in 2008 and currently claims six million available tracks provided through partnerships with corporate and independent record labels, and airs brief audio ads every 15 minutes of music play. Spotify has seen a level of success in the West, gaining more than four million users in Sweden, Norway, Finland, the UK, France and Spain. It has announced a US$50 million investment, and backers include the Li Ka Shing Foundation. It will launch in China via the billionaire’s Tom Group.
Though Spotify predominantly relies on ad revenue to support its operations, it offers a ‘premium’ membership option that allows audiences to listen to music without ads for a charge of about US$14.
2 In China, Spotify faces stiff competition from Baidu, the search engine powerhouse that dominates China’s search market. A portion of Baidu’s allure stems from its ability to deliver music for users to download for free (often from pirated sources, which has landed it in court several times). Also in the mix is Google China, which launched a free music downloading option in March in an attempt to steal market share from Baidu. Like Spotify, Google China sought a dependable service by signing distribution deals with the world’s largest record labels.
Region-wide mobile services - Nokia’s Comes With Music programme, for example - will also give Spotify a run for its money in China.
3 This level of competition is not the only issue the service will face, says William Bao Bean, a partner with Softbank India & China Holdings.
“The market is not trained to listen to ads between music, even on the radio,” Bean says. He adds that to make a music service succeed in China requires the support of a major industry player such as Google or Baidu; Spotify’s deal with Tom may not be enough.
4 The jury is out on whether Spotify’s model could be any more successful in other Asian markets. According to Jasper Donat, co-founder of Branded, the company behind the Music Matters conference, the most successful music-providing services are backed by already-established power players in the mobile market. As well as Nokia’s service, music offerings from handset brands include Sony Ericsson’s Play Now. Telecoms players are also involved; SingTel offers AMPed in Singapore and there are services by PCCW in Hong Kong and AirTel in India. With these programmes, users have a portable music player and can keep the songs they download. Many of the services already have some sort of free streaming.
In these examples, the music service is an add-on for a handset business or a telco; as such, they are less focused on building a business around advertising them than in the Spotify model.
5 But there will be some markets more open to Spotify’s ad-supported business model. Bean suggests these markets may be Australia, Singapore and Taiwan, which have mature media-consuming audiences that have the stamina for audio commercials.
“Spotify can be successful if it promotes itself not as a mass-consumer platform, but a business-to-business music channel,” adds a Shanghai-based source close to the music industry. “From where I stand, it has an opportunity to work in collaboration with brands that are looking to be the brand skin over the Spotify seed.”
Spotify has already dabbled in this strategy. Fiat became the first brand to create a playlist linked to a campaign. It also asked audiences to upload their own songs in conjunction with the launch of its 500 Convertible.
As such, Spotify could add some interesting new options for brands in China; the question is whether it can build enough scale to make it worthwhile.
What it means for…
Marketers
- Marketers can air ads of up to 30 seconds, played as frequently as 15 minutes apart, targeting netizens in any market Spotify is operational. Traditional banner ads and video ads seen on users’ playlist pages are also available. At a basic level brands can treat Spotify like radio, but with much better metrics and with scope for personalisation.
- Brands can also create playlists surrounding their campaigns and encourage audience participation.
Music providers
- Spotify has gained support from the music labels because it offers a way of monetising music without completely giving it away. China has been seen as a major problem market for the music industry given the levels of piracy; anything that can help make money for the labels around music in the market will have their support.
-However, it remains to be seen how much locally sourced music Spotify will have access to in Asia. Building a locally relevant track list will be crucial if the service is to get off the ground.
Got a view?
Email [email protected]
This article was originally published in 27 August 2009 issue of Media.
1 Spotify is an ad-supported music service that allows users to stream songs and create playlists in exchange for listening to ads. Founded in Sweden but headquartered in London, it launched publicly in 2008 and currently claims six million available tracks provided through partnerships with corporate and independent record labels, and airs brief audio ads every 15 minutes of music play. Spotify has seen a level of success in the West, gaining more than four million users in Sweden, Norway, Finland, the UK, France and Spain. It has announced a US$50 million investment, and backers include the Li Ka Shing Foundation. It will launch in China via the billionaire’s Tom Group.
Though Spotify predominantly relies on ad revenue to support its operations, it offers a ‘premium’ membership option that allows audiences to listen to music without ads for a charge of about US$14.
2 In China, Spotify faces stiff competition from Baidu, the search engine powerhouse that dominates China’s search market. A portion of Baidu’s allure stems from its ability to deliver music for users to download for free (often from pirated sources, which has landed it in court several times). Also in the mix is Google China, which launched a free music downloading option in March in an attempt to steal market share from Baidu. Like Spotify, Google China sought a dependable service by signing distribution deals with the world’s largest record labels.
Region-wide mobile services - Nokia’s Comes With Music programme, for example - will also give Spotify a run for its money in China.
3 This level of competition is not the only issue the service will face, says William Bao Bean, a partner with Softbank India & China Holdings.
“The market is not trained to listen to ads between music, even on the radio,” Bean says. He adds that to make a music service succeed in China requires the support of a major industry player such as Google or Baidu; Spotify’s deal with Tom may not be enough.
4 The jury is out on whether Spotify’s model could be any more successful in other Asian markets. According to Jasper Donat, co-founder of Branded, the company behind the Music Matters conference, the most successful music-providing services are backed by already-established power players in the mobile market. As well as Nokia’s service, music offerings from handset brands include Sony Ericsson’s Play Now. Telecoms players are also involved; SingTel offers AMPed in Singapore and there are services by PCCW in Hong Kong and AirTel in India. With these programmes, users have a portable music player and can keep the songs they download. Many of the services already have some sort of free streaming.
In these examples, the music service is an add-on for a handset business or a telco; as such, they are less focused on building a business around advertising them than in the Spotify model.
5 But there will be some markets more open to Spotify’s ad-supported business model. Bean suggests these markets may be Australia, Singapore and Taiwan, which have mature media-consuming audiences that have the stamina for audio commercials.
“Spotify can be successful if it promotes itself not as a mass-consumer platform, but a business-to-business music channel,” adds a Shanghai-based source close to the music industry. “From where I stand, it has an opportunity to work in collaboration with brands that are looking to be the brand skin over the Spotify seed.”
Spotify has already dabbled in this strategy. Fiat became the first brand to create a playlist linked to a campaign. It also asked audiences to upload their own songs in conjunction with the launch of its 500 Convertible.
As such, Spotify could add some interesting new options for brands in China; the question is whether it can build enough scale to make it worthwhile.
What it means for…
Marketers
- Marketers can air ads of up to 30 seconds, played as frequently as 15 minutes apart, targeting netizens in any market Spotify is operational. Traditional banner ads and video ads seen on users’ playlist pages are also available. At a basic level brands can treat Spotify like radio, but with much better metrics and with scope for personalisation.
- Brands can also create playlists surrounding their campaigns and encourage audience participation.
Music providers
- Spotify has gained support from the music labels because it offers a way of monetising music without completely giving it away. China has been seen as a major problem market for the music industry given the levels of piracy; anything that can help make money for the labels around music in the market will have their support.
-However, it remains to be seen how much locally sourced music Spotify will have access to in Asia. Building a locally relevant track list will be crucial if the service is to get off the ground.
Got a view?
Email [email protected]
This article was originally published in 27 August 2009 issue of Media.
.png&h=268&w=401&q=100&v=20250320&c=1)
.jpg&h=268&w=401&q=100&v=20250320&c=1)
.jpg&h=268&w=401&q=100&v=20250320&c=1)
.jpg&h=268&w=401&q=100&v=20250320&c=1)