Music streaming apps: Why it takes a telco to tango

JioMusic, the free-to-use music app, topped the charts in terms of unique visitors which stood at 19 million in February this year.

Music streaming apps, JioMusic, music app, Bharti Airtel, Wynk, Saavn, Airtel, Gaana, DAN Performance Group, Times of India Group, FICCI
The total time spent on Saavn by users was just 194 million minutes and the music app had just 4 million unique visitors.

JioMusic, the free-to-use music app, topped the charts in terms of unique visitors which stood at 19 million in February this year. But it was on the Bharti Airtel-operated Wynk that listeners spent the most time at 1,679 million minutes, data from research agency ComScore revealed. The total time spent on Saavn by users was just 194 million minutes and the music app had just 4 million unique visitors. In the last week of March, music app Saavn —promoted by Rishi Malhotra and others — decided it wanted to team up with JioMusic, a purely commercial decision. Acquiring customers can be costly at Rs 50 per download but if there is support from a mobile services provider the cost falls dramatically — by 60 % to Rs 20 per download.

Given the high cost of running the operations and the heightened competitive intensity — there are at least half a dozen in the market —it’s hard to make ends meet. Although Saavn posted a 47% jump in revenue from operations to Rs 39.5 crore for the year ended December 31, 2016, the expenses soared 50% leaving profits flat at Rs 1 crore, according to RoC filings.

As Rohit Dokania, VP, research, IDFC Securities, explains telecom operators have a direct relation with customers which makes it easier for them to cross-sell any product, especially those owned and operated by them. “For example, Airtel wouldn’t have an issue promoting its own music app Wynk to its users,” Dokania points out. While this would mean stand-alone players like Gaana — owned by Times Internet — are at a disadvantage, Dokani believes a strong shareholder like China’s media and telecom conglomerate Tencent should give the app enough firepower to compete. Also Gaana, as Vivek Bhargava, CEO, DAN Performance Group, says has the support of the Times of India Group, that allows it to sell ad inventory to large number of advertisers. In February, listeners spent just 545 million minutes on Gaana although the unique user base was a high 18 million.

Jehil Thakkar, partner at Deloitte India, feels an independent revenue model for music apps is yet to be created. “These apps are a good source to drive indirect revenue or data revenue for telecom. This is one reason why telcos are tying up with these apps,” Thakkar said. With subscription revenues small, however, music apps continue to generate the bulk of their top line from advertising. In 2016-17, Gaana earned Rs 17.22 crore from advertising and just Rs 7.67 crore from subscriptions, filings with the RoC reveal. Saavn too posted a higher advertising revenue at Rs 9.8 crore, for the year to December 2016. Subscription revenues in the same period stood at just Rs 2.2 crore while service fees fetched Rs 26.7 crore.

Airtel-owned Wynk posted a 145% jump in revenue to Rs 12 lakh in FY17 from Rs 4.9 lakh in FY16. Losses too increased 160% to Rs 41,099 in FY17 from Rs 15,834 in FY16. In September last year, Wynk Music tied up with InMobi in effort to drive advertising revenues. The total number of music streaming users in 2017 was 87.6 million of which 2% were paid subscribers, according to FICCI-EY. This share is expected to rise to 5% by 2020 by which time the total listener base is estimated at 273 million.

There are also those who believe usage depends entirely on content. Bhargava says music apps need to invest in content in the initial years to build up a user base. “However, the earnings from advertising take care of a very small portion of the expenditure so they will lose money and that is why apps may be teaming up with telcos,” Bhargava explained. The cost of a 10 second ad spot on music streaming apps ranges between Rs 150-250 CPM (cost per thousand impressions).

According to a FICCI-EY report average revenue per user (ARPU) is estimated to about Rs 70 per user in case of music apps. Industry observers point out that traditional method of selling advertising inventory does not apply to music apps. For example, radio channels air 15 minutes of advertisements in a clock hour, while music apps do not follow any set pattern.

Sameer Batra, CEO, Wynk, points out that in music streaming business the challenge is to have a user-friendly interface. “Given that a user listens to just four to five songs a day, the trick is to provide a personalised experience at the click of just one button. Once you are aware what about your customer’s preference, it is easier to monetise the service,”Batra said.

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