The founder of distribution and artist tools platform Stem, Milana Rabkin Lewis, made a fun suggestion on Twitter last week — an industry book club entirely focused on IPO filings, with Warner Music Group’s S1/A as the first assignment.
Warner’s S1/A is the dense, 190-pages-plus SEC filing that just officially triggered WMG’s IPO launch on the Nasdaq. Within it, you’ll find juicy details on everything from company strategy to conflicts of interest, future “risk factors,” and even exec pay packages. There’s also a healthy dose of cock-a-doodle-dooing in there to get potential shareholders hot under the collar. For example, a section where Warner highlights “secular trends [that] will continue to drive growth in the recorded music industry,” under which it specifically notes its excitement for Brazil and India, where, it says, there “remains substantial opportunity” for revenue increases.
India in particular, with 1.33 billion people and fast-growing 3G/4G mobile coverage, has long been looked upon as one of the record industry’s hottest future prospects — and one which becomes ever more important as streaming growth in more ‘mature’ markets like the US and Europe begins to slow.
But there is now a wrinkle in this narrative. Last month, the IFPI launched the latest edition of its Global Music Report — the definitive annual compendium of what the record industry got paid in the prior year. It showed that, in 2019, India’s total wholesale market (i.e. the money paid to labels and artists) rose 18.7% to $181.4 million, largely thanks to a bump in ad-funded streaming revenues. Yet within that $181.4 million figure, subscription audio streaming revenues increased by just 5.3% to $43.8 million. This was not only way behind the rate of audio subscription revenue growth worldwide in 2019 (+24.1%), it also represented a dramatic slowdown for India: The country’s $43.8 million subscription revenues in 2019 were up by just $2.2 million on the prior year; that $2.2 million, in turn, was nearly a fifth of the size of the $10.4 million equivalent growth India saw from streaming subs in 2018.
No wonder local voices in India are now questioning whether the country, currently the world’s 17th biggest recorded music streaming market, can “meet its goal of becoming one of the world’s top 10 music markets by 2022.”
One interesting aspect in the middle of all of this is Spotify. The “world’s Number One audio platform”, as it now bills itself, launched in India in February 2019. At the time, Spotify founder Daniel Ek trumpeted his service’s arrival in the market by stating: “Not only will Spotify bring Indian artists to the world, we’ll also bring the world’s music to fans across India. Spotify’s music family just got a whole lot bigger.”
But did it? Spotify doesn’t regularly give away Monthly Active User (MAU) and subscriber figures for specific countries in its investor updates — the last official figure we got for India came two months after SPOT’s launch there, when it said it had more than 2 million active users in the territory. Spotify does, however, break down its performance, in percentage terms, for certain global regions (North America, Europe, Latin America and Rest of the World) each quarter.
I’ve used these percentage figures, alongside Spotify’s official global MAU and subscriber numbers, to ascertain how many people have been using (and paying for) Spotify in these geographical regions at the close of each quarter. Two important things: (i) the Rest of the World figure combines a number of regions like Indonesia, Vietnam, India, the Middle East, North Africa, and Japan, whose total addressable population adds up to more than 2.5 billion people; (ii) We can therefore be certain that any increases reflected by this figure represents the absolute maximum growth that could have happened in India at Spotify during a given period.
The number to focus on is that 2.8 million increase in Rest of the World subscriptions in 2019. It tells us that, across the course of last year, Spotify could have added, at most, 2.8 million paying customers in India — and that’s ignoring the fact that a proportion of these subs would have inevitably come in Indonesia (population: 268 million), Japan (population: 127 million), Vietnam (population: 95.5 million) etc.
2.8 million, by the way, is the equivalent of just 0.2% of India’s 1.33 billion population.
If Spotify, and the global music business, is going to live up to Daniel Ek’s hopes of getting “a whole lot bigger” in India, this number is going to have to shift upwards, and fast. Especially when you consider that Spotify’s standard individual premium account price in India is 1189 Rupees for a full year, the equivalent of just $1.31 per month at current exchange rates. And that, in a bid to stimulate subscription uptake in India late last year, Spotify cut this yearly subscription figure to just 699 Rupees ($0.77 per month).
That 699 Rupees annual deal is still on offer at Spotify in India (it closes on June 30th). And, perhaps as a direct result of it, something interesting happened at Spotify in the first quarter of 2020.
Unlike the pattern seen in calendar 2019, Rest of the World made up a significant proportion (31%) of all new global subscriptions at Spotify in Q1 (January to March) this year. In fact, the 1.9 million new subscribers the service attracted in RoW during this period was over half the size of SPOT’s new subscriber count from the same region in the entire 12 months of 2019.
Question is, has Spotify, under pressure from a poor subscriber uptake in India last year, now panicked into slashing its prices in the market via promotions? Today, not only can Indian consumers grab a full year of Spotify for less than $1 per month — they can also get a three month trial of Spotify Premium for no money whatsoever.
Such moves are likely to materially improve Spotify’s Rest of the World subscriber count in emerging territories like India throughout 2020. Yet they might not do a whole lot of good for the record industry’s streaming income — nor the perceived value of music around the globe — which may curtail the optimism for India coming out of companies like Warner.
Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Rolling Stone.