Spotify finds crowded Indian music streaming market hard to crack

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Updated: April 30, 2019 2:11:29 PM

Even while Spotify is "very pleased with the (India) results", the world's leading music streaming service said there will be 'some' challenges in scaling its ad revenue in India. Spotify competes with Apple Music, YouTube Music, Gaana, JioSaavn etc., in India's crowded music streaming market.

Spotify hit 2 million-user mark since its launch in India around two months back (Reuters)

Even while Spotify is “very pleased with the results” in India as it hit 2 million-user mark since its launch around two months back, the world’s leading music streaming service said that there will be ‘some’ challenges in scaling its ad revenue in India and in Asia. Spotify is the latest to join the crowded music streaming market in India and compete with the likes of Apple Music, YouTube Music, Gaana, JioSaavn etc.

The challenges will be “in keeping pace with the growth from a revenue perspective because those markets just simply don’t have as developed an ad market as we have here in the U.S,” said Barry McCarthy, CFO, Spotify in Q1 2019 earnings call with analysts on Monday.

Moreover, Spotify’s reach in India and other new markets will be relatively small initially until it has a critical mass and has “reached the attractiveness of the platform to advertisers as relentlessly true in the United States as well,” McCarthy said. The transcript of the call is available at seekingalpha.com.

Importantly, Spotify’s launch in India was amid licensing issues it faced including from music publisher Warner/Chappell that sued Spotify claiming that latter doesn’t have proper rights for its songs. Spotify recently too was embroiled in another licensing issue with Saregama following which it agreed to pull down all Saregama songs from the app.

Spotify’s launch in India was highly anticipated even as it the app garnered over 1 million users within a week of its launch while the next set of 1 million users was acquired in the following seven weeks.

Lower ARPU

The company reported a decline in average revenue per user (ARPU) by 2 per cent to $5.27 even as it expected the fall in ARPU for the rest of the year to be in the low single digits. Spotify said that 75 per cent of the hit on ARPU is due to changes in product mix while the rest is because of changes in geographic mix and other factors.

Highlighting India scenario, Spotify said that the price points in India are significantly lower than the US. Hence, “if on day one we had zero and day two we had lots, the day two average company ARPU will be lower than it was on day zero,” McCarthy said.

Spotify Premium starts with the base price of Rs 119 per month or Rs 13 per day and goes up to Rs 1,189 annually. However, margins across regions, independent of price points, are relatively equal, he said. The US pricing, however, stands at $9.99 monthly (around Rs 700).

It claimed 217 million users globally in the earnings call, that went up from 207 million at the end of last year. The app has 100 million paying users versus 96 million from 2018 end.

Spotify’s Q1 2019 revenue stood at around $1.7 billion, growing by 33 per cent year-on-year.

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