The Premise: People don’t buy music anymore
Having worked on some form of musical marketing or data analytics for the last 24 months or more, my premise is that people are spending less and less on music. I’ll start at home, I spend about $8 a month on music. This goes to an Apple Music subscription.
What that means for me is that I can listen to untold amounts of music without giving thought to cost. A few years ago, that $8 could have afforded me one album if I was lucky. The tide has turned on the music industry. It was not long ago that musical moguls were fighting this wave.
Do you remember the lawsuits and marketing campaigns that were run against Napster and others? Some readers will be too young to remember this. I only know it from watching documentaries. The revolution that Napster brought was one that shook the music and film industry to the core.
Billions of dollars were lost annually in revenue. Heck, billions of dollars are still lost today. By killing that beast, the film and music moguls failed to realised that the idea was out there. I believe it was Medgar Evers who said, “You can kill a man, but you can’t kill an idea.”
The proverbial man in the case, Napster, was killed. The idea of file sharing lived on. Instead of continuing on the futile war against the wind, companies such as Spotify began to build sails. The subscription model is one the highest grossing and more sustainable business models around.
I am in no way saying that it is perfect. From a startup point of view it is a dangerous area to tread. Your revenue is not guaranteed. There are cashflow worries at every turn. Expansion has to be well timed, and cautious. You constantly have to work on customer acquisition and retention. You don’t have to do much for me to hit the unsubscribe button.
I am part of a generation that is spoilt for choice. This is how I ended up on Apple Music, having started on Spotify. Apple Music has managed to retain me by making it more difficult to move. In theory I could cancel and move immediately. However, in practice, that would mean having to get all the music that I have on the 50gb cloud moved elsewhere. The time is not a luxury that I have.
My premise will focus primarily on the mother content of Africa. I will contend that iTunes and Apple Music are merely status symbols. That they do not give enough value to artists and users on the continent to warrant having. I have not made any conclusion.
As I write this, I will be investigating and gathering data to prove or disprove my premise. At the end of it all, I will offer propose solutions. The issue is certainly there, perhaps not to the extent that I expect it to be.
One of the businesses that I am involved it depends on understanding this data, and using it to drive our decision making. This put us right at the frontline of this in many ways. One as a competitor of the giant that is Apple. In another way, as a collaborator and use, as we represent artists who have interest in the success of Apple Music and iTunes in Africa. An ideal situation for us would be to strike a balance between the two.
The chart above illustrates how Spotify continues to outgrow Apple Music in terms of paid users. I will admit that I was very surprised by this data. My expectation was that you would have seen Apple Music closing the gap with Spotify with each year that passes.
You do not need to be a genius to figure out what is continuing to drive this wedge between the two titans. I would attribute this to device usage. Spotify has a wider penetration of the market due to the sheer amount of devices that you can use it on.
This is where Apple is missing a trick. You can get Apple Music on your Windows computer via the iTunes App, but that is where it ends. You can get Spotify on any Android device, any windows devices and you guessed it, any Apple device. Android is already miles ahead of the market. Spotify goes into that market unchallenged.
The one key detail missing in the chart above is that Apple is ahead of Spotify in the North American market. I cannot say that is any surprise. Apple devices have a large market share in North America, so it follows that they should also capture the streaming on the devices. [Source]
Direction of the industry
The graphic above is telling of which way things are going. Physical sales have dropped by about 60+% in the last 10 years. All indicators show that this will accelerate in years to come. As infrastructure continues to improve across the world, streaming will become more viable in places where it is currently limited by internet speed.
Another massive factor that has contributed to this is the increased affordability of devices. Android has made it easier for more companies to bring decent devices onto the market, with a good operating system driving them.
You will note that in that same 10 year period, streaming has increased by 99.9%. That is the equivalent of saying that streaming was nonexistent a decade ago, but it now at the forefront of music consumption.
Let’s throw in one more chart
An incredible win for artist in this chart is that as of March, just under 1 in 2 Spotify subscribers are paying. This means that artist earn more from streams by paid subscribers than free users. I think no one will argue that Spotify is absolutely mandatory for any serious artist, as is Apple Music.
We will start with looking at the largest economies in Africa, by GDP
Apple Music and Spotify are actively competing for the South Africa market.
I should hope I am preaching to the choir with this one. The pricing is not quite relevant for the purpose of this post. Apple Music came onto the South African market in June 2015. This is a market where there is a greater emphasis on cross platform usage. I would estimate that under 4% of the population use Apple devices daily. That strangles the market for Apple.
Spotify came onto the same market in 2017. They have not taken over yet. I expect they will.
The Nigerian market has had iTunes since 2012. At the time of writing this, big players in the streaming market have not commanded marketshare. Local streaming services in Nigeria are still ahead. They are cheaper, and more purpose built. MTN Music + is a market leader with about 3 and a half million paid subscribers in Nigeria. Per Reuters
The numbers are quite minisqure when looked at in context. This is a country with a population of over 180 million. The potential is evident. Sony Music’s ringback caller tones peaked at about $100 million a year, ahead of streaming revenue.
I have previously written about this. Here is a take from South Africa, with insight to DJs. Business Inside SA
You are looking at about 5c per stream on Spotify and 11c on Apple Music. To put it into context, a million streams are worth $3800 on Spotify and about $7800 on Apple Music. I don’t know any indie artists that would come anywhere near a quarter of those numbers. I am not saying to neglect the platforms completely. There is value in being discovered by new fans on there. Managing your expectations in relation to earnings is important.
Africa’s largest music service
Boomplay are leading the music streaming market in Africa, by a long shot. I was not aware of them until a few months ago when a Zambia artist we work with brought them up as potential channel for distribution. They have been around since 2015. They are owned by a Chinese company, Transsion Holdings, who also happen to have a large marketshare in the phone market in Africa. It has 44 million active users.
Boomplay have just completed a funding round which raised $20 million. This will certainly improve their platform and service as a whole. Q
Proposed Model for Zimbabwe
On our platform, we have about 3% conversion rate for users with product intent. This is to say if we engage a user on whatever platform we can reach them. If this user is interested in the artist, there is only a 3% chance that they would convert into a purchase.
The number falls to under 1% in some cases, and goes up to 5% in others. The conclusion is that most people do not buy music. Artists are partly responsible for fuelling this trend. They buckle and give the music away for free. This diminishes the value of art.
Streaming is a possible way to pivot. We currently have a ton of content that can be streamed from our platform for free. Then comes the issue of data. Streaming is expensive, most people do not have access to wifi. The biggest win would come from building infrastructure that allows users to access music and save it offline without eating into their data. It’s a long game, you won’t see ROI in perhaps a decade. It would certainly work though.
The naysayers will pull out the artists who have done well in this market. I will lay an olive branch by mentioning some of these. Nasty C went platinum with SMA, Kwesta Went multi-platinum with DAKAR II, AKA went platinum. These are some of the artists that comes to mind. It is worth nothing that one key similarity with most of these artists is that they had record label backing or some form of international following. Now that we have established that success is not impossible in this climate, let’s see what the numbers say.
To go gold in South Africa you need to sell 15 000 units. To achieve the same accolade in the US you would have to sell 500 000 units.
To be certified platinum you need to sell 30 000 units in South Africa. In the US, you would need to sell 1 000 000. The bar is lowered. This is reasonable. The US has a large middle class, with more spending power. How can the maths be applied to Zimbabwe?
We will set GDP and population as parameters for this benchmark.
|South Africa||The USA||Zimbabwe|
|GDP||$349.4 Billion||$19.39 Trillion||$17.85 Billion|
|Population||56.7 Million||325.7 Million||16.53 Million|
|Gold Certified||15 000||500 000||?|
|Platinum Certified||30 000||1 000 000||?|
Before we crunch the numbers and set a bar for Zimbabwe, we need to mention that there is a massive role to be played by infrastructure. It determined how sales are tracked. It determines how distribution works. These are massive when looking at something like this.
Anyhow, we will go with proportion to work this out.
Going Platinum Based on GDP
If a GPD of 349.4 billion requires 30 000 in sales to go platinum what should a GDP of 17.85 billion require?
If a GDP of 19 390 000 000 000 requires 1 000 000 sales to go platinum, what should a GDP of 17 850 000 000 require?
Gold would just be half of these numbers.
Going Gold Based on Population
If a population of 52.72 million requires 30 000 sales to go platinum. What should a population of 16.53 million require?
If a population of 325.7 million requires 1 000 000 sales to go platinum. What should a population of 16.53 require?
I don’t think anyone would argue that GDP is a better indicator than population in this case. GDP gives insight into spending power within said population.
My initial premise is incorrect on a large scale. Where there is a thriving middle class, people spend on music. If streaming services are to make headway in Africa, infrastructure will have to lead the way. More people with access to affordable internet. The money that is currently being spent on overpriced internet bundles would then be channeled to the artists.
For a local artist in Zimbabwe, one who market is realistically not global, I’d focus on grassroots. Create meaningful connections and relationships with fans and other stakeholders in the music industry. Apple Music and Spotify are a long way off paying your rent.