48% would consider subscribing to Spotify, but the economy and competition could affect opportunities
The Issue
Music streaming was first introduced to the African market in 2013 with Spinlet, a Finnish streaming platform. A group of Nigerian investors represented by Verod Capital Management, led by Eric Idiahi, acquired the platform in 2011 and launched in Nigeria. Spinlet operates under the freemium model – model basic services are free, while additional features are offered via paid subscriptions. It makes its revenues by selling streaming subscriptions to premium users and advertising placements to third parties.
Between 2011 and 2015, the brand invested significantly in growing its customer base and consumer interaction. Spinlet reached a peak of 2 million freemium users – even though the paying user base never grew beyond 10% of freemium users. By 2016, Apple and Deezer had begun to focus on the African market, creating Nigerian and African playlists. Over the past five years, the music streaming industry has grown with more streaming platform launched. Even telecommunication companies have ventured into the space – South Africa’s MTN Group launched MusicTime in 2018, available in other African countries besides South Africa, including Nigeria, Ghana, and Zambia.
Nigeria has a large youth population, which makes it a viable market for online audio streaming companies. The country has the 7th highest number of mobile phone users globally, and will be 172 million in 2019. More impressively, the country currently has 128 million mobile internet subscriptions, according to the Nigerian Communication Commission (NCC). Account for people with multiple phones or subscriptions, the number of users drops to 56 million. By 2023, it is expected to reach 76 million people.
Nigerians are adopting mobile phones at an impressive rate, but what is the impact on digital streaming. In 2019, the IFPI global report showed an overall global increase in revenue [for the record business] of 8.2%. In Africa, combined with the Middle East, it was about 15% – which places the continent as the world’s second-highest growth market after Latin America. In a Geopoll 2019 survey, Nigeria led with 46.67% music streaming users being premium subscribers, followed by Kenya at 27.2% and South Africa at 25%.
The Question
Nigerians are adopting mobile phones at an impressive rate, but what is the impact on digital streaming. In 2019, the IFPI global report showed an overall global increase in revenue [for the record business] of 8.2%. In Africa, combined with the Middle East, it was about 15% – which places the continent as the world’s second-highest growth market after Latin America. In a Geopoll 2019 survey, Nigeria led with 46.67% music streaming users being premium subscribers, followed by Kenya at 27.2% and South Africa at 25%.
In the African music industry, especially in Nigeria, artists, songwriters, producers, and record labels find it challenging to make money off their works outside of music shows. The average premium subscription fee in Africa typically costs between USD 1.00 to USD 10.00 per month. Still, many Nigerian consumers do not like to pay for music. With an estimated population of 100 million youths and music streaming penetration expected to grow by 14.9% by 2024, it might yet become a promising market for music streaming startups.
In 2018, the global music streaming service, Spotify, arrived in Africa by making its initial entry into South Africa. For Michael Krause, the Managing Director, Europe, Middle East and Africa (EMEA), Africa is “the home continent of music historically”. Three years later, Spotify has expanded into 85 new markets, including Nigeria, Cameroun, Pakistan and Bangladesh. Collectively, these new markets represent more than a billion people – a massive untapped audience for Spotify. Currently, the brand has more than 345 million monthly active users and over 155 million paid subscribers globally. The dynamic growth of Nigeria’s economy and population will impact the market.
But currently, the country already has about 25 music streaming platforms, even though 90 million citizens still live below the poverty line. Given the well-documented numbers, which suggest that Africans pay more for internet service than any other region, music streaming is yet to be embraced by the mass market. Mobile broadband is relatively expensive in Nigeria, with the cost of 1GB roughly $2.78. The average Nigerian already spends 73% of their income on food and beverage products, so purchasing digital content drops low on a list of priorities. Even for those Nigerians who live above the poverty line, other factors come to play.
We asked our national focus group what their best music streaming platforms; if they would consider subscribing to Spotify and to give a reason for their decisions.
“There is serious poverty in the country, but the content market has never had a better moment,” our expert said. “Africa’s music streaming revenue is expected to hit a 12% annual growth that will see the market reach a volume of $822 million by 2024. Spotify alone offers more than 35 million songs and has one of the best algorithms for music curation and social interaction among the streaming apps.
What The Streets Are Saying
Asked their best music streaming platform, 42.7% of our focus group selected Google Play; 33.3% selected Apple Music; 16% selected Deezer, while 8.3% chose Spotify. Asked if they would consider subscribing to Spotify, 58% said they wouldn’t while 48% said ‘yes’. For those who would subscribe to the platforms, the customers focused on three different factors: the music playlists, the interface and the podcast library.
Though the brand launched in Nigeria last month, almost half of our consumer panel claim that they are aware of the product and have formed strong opinions about their choices.
“For music streaming in Nigeria, Google Music, Boomplay, Apple Music, Deezer would probably top of many consumers’ list”, said an expert. “But avid content consumers are willing to explore different choices, especially when certain brands have distinguished themselves. No consumer wants to use just one streaming platform when there are more to enjoy, even if they do not want to pay for it. As long as music apps can also offer free access to content, consumers can test, compare and pick their favourites. But you can hardly find those who subscribe to more than two music streaming platforms – maybe one for its music & sound quality and the other for the podcast”.
“There is serious competition in streaming now, and that benefits Nigerians that are willing to pay for it”, said another expert who leads a technology company. “For every Apple Music, YouTube Music, Spotify or Deezer, there are those also trying to raise their heads above water – Spinlet, Orin, Playfre. Or maybe needs to invest in brand marketing, for example, AudioMack, MTN Music+. More music streaming platforms are entering the Nigerian market with better payment methods and cheaper pricing, so many big players will undoubtedly slash their prices”.
Most countries affected by COVID-19 declared lockdowns to contain the virus’s spread, which massively increased users live streaming via Netflix, YouTube and Instagram. According to Tencent Music Entertainment, the revenue from online music subscriptions increased by 70.0% in Q’1 2020. Additionally, the number of online music paying users touched 42.7 million, a year-over-year rise of nearly 50%. Moreover, the growing popularity of live streaming and local content availability on online platforms propels market growth.
“There is serious poverty in the country, but the content market has never had a better moment,” our expert said. “Africa’s music streaming revenue is expected to hit a 12% annual growth that will see the market reach a volume of $822 million by 2024. Spotify alone offers more than 35 million songs and has one of the best algorithms for music curation and social interaction among the streaming apps. More Nigerians, specifically the younger audience, are becoming more aware of the brand, which is a significant reason they go through the cumbersome task of getting a VPN. Still, it is not coming here to dominate – at least, not yet. Tecno, Itel and Infinix have a robust presence in the Nigerian market. With Transsion (Chinese mobile phone manufacturer) pre-installing Boomplay into phones in the country, it’s going to make a serious dent on opportunities for Spotify”.
Insights on What The Streets Are Saying are drawn from data collected through in-depth interviews and surveys with our 500-member consumer panel spread across the country, including 100 culture insiders, who are all leading thinkers and doers across media and marketing.
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