Opinion | Why India won't be music to Spotify's ears

(Image: Reuters)

Music streaming in India won’t be the same again. Spotify, the most popular music streaming app in Europe and the Americas, is finalising its plans to launch in India – a market the Swedish firm has been eyeing for long despite a few failed attempts including the acquisition of local music streaming firms.

The reason why Spotify has been desperate to enter India is simply the scale. Almost all of 1.3 billion Indians love listening to music. Lately, they are listening to music on handheld devices. In the past couple of years, many of them have moved from SD cards (used for storing music, videos, etc) to smartphones and feature phones for streaming music, thanks to the availability of cheap data.

India has always been a big market for music, especially those used in movies. Spotify, without any doubt, will get a good number of users, especially for its basic music streaming service that comes free of cost (but with advertisements). But will it be able to convert users to its premium service and get them to pay for listening to music?

The short answer to the question: No.

Currently, there are about 100 million users who stream music on different apps, and only 1 percent are paid subscribers. Considering that Spotify is yet to make profits globally, an India entry will just increase its losses.

The challenges will be plenty. Besides the fact that Indians are yet to get into the habit of paying for listening to music, piracy is among the highest in India. On an average, 285 Indians visit websites offering pirated music every second. Making them pay won’t be easy.

There are a dozen home-grown and global music streaming platforms, including Gaana, Saavn, Hungama, Airtel’s Wynk, Apple Music and Amazon’s Prime Music. Spotify will have to compete with all of them. Interestingly, most of them are associated service offering from a large business, such as e-commerce or telecom, and are backed by deep pockets, unlike Spotify that only deals with music streaming.

In the immediate past quarter, Spotify’s average revenue per user has declined by 6 percent to 4.73 euros despite 87 million of Spotify’s 191 million users across over 65 markets being premium subscribers.

In India, Spotify’s operating cost will be very high, especially because the market is dominated by Bollywood and other local language music. Spotify’s existing global music collection will be of very little use, and the company will have to secure licences from local music labels, such as T-Series, Saregama and Times Music to be relevant. In any case, Spotify has been having a tough time with global music companies like Universal, Sony and Warner declining to give it the licenses for India.

Not only will Spotify have to fork out a huge amount in licensing, and the cost will keep on increasing as music companies are known for reinventing their royalty terms. Even local players have a tough time dealing with the music companies to secure streaming rights. Moreover, music companies have increased rates in recent times after the digital music streaming market got competitive.

At present, most music streaming apps charge Rs 99 a month with a month’s free trial, Apple Music charges Rs 120 a month (individual subscription) with three months free trial in India, while Amazon’s Prime Music comes bundled with its Prime subscription that also gives advertisement-free movies, exclusive e-commerce deals and free delivery for Rs 999 a year. Pricing its premium subscriptions correctly will also be a challenge.

The only respite could be, going by EY projections, India is expected to have 273 million people streaming music online by 2020. But Spotify will have to be happy with 99.9 percent of them being free users and depend on revenue from advertisements.

Disclaimer: Moneycontrol and Network18 are owned by Independent Media Trust, which is part of the same group that owns JioMusic, a music streaming app.