Thanks to the rapid development of technology, music recording has expanded into a massive and flexible digital network. And with that, comes evolving and higher demands from consumers, whose lives now meteorite on the fast lane, heady and high with upbeat hip-hop that came with advances in technology.
In recent years, there has been a growing need for on-demand entertainment. Many consumers, particularly the young generation now prefer to have their entertainment “on the go” as and when, and where they want it.
Hence, on-demand entertainment or digital streaming is the name of the game, and is taking the world by storm given its affordability and fluid mobility.
Eric Harvey of the Chicago-based Pitchfork Media points out that the idea of music streaming has been around for more than a century. He noted, in fact, it can be traced back to 1888 with Edward Bellamy predicting the idea of listening to streamed music via phone lines when he wrote his science fiction novel “Looking Backward”.
Looking Backward narrated the story of a man who woke up in the year 2000 and discovered things such as phone lines broadcasting music based on a set of playlist, into what was called a “music room”.
Bellamy had written that “an arrangement for providing everybody with music in their homes, perfect in quality, unlimited in quantity, suited to every mood and beginning and ceasing at will” should be seen as reaching the limit of “human felicity”.
So began, the idea of making music easily accessible by the mass market. With the ever evolving technology landscape, expanding network reach and faster internet, this idea is no longer encapsulated within our imagination, but has become a reality today.
While the rapidly expanding reach and increasingly fast internet have brought on the music industry’s biggest single threat: digital piracy, it has also pulled out a lifeline for the previously ailing industry.
The music industry as well as the overall entertainment industry now looks to further invest in streaming digital media as a way to combat piracy, by offering the consumers access to a wide array of digital entertainment with just a few clicks of a mouse.
But music streaming or generally digital media streaming is not something new in the market.
Live streaming of media via digital gadgets and technology such as the PC, first came about with the introduction of Adobe Flash app to stream images and videos via embedded programmes such as YouTube and other flash programmes.
Then came the introduction of Internet Radio in 1993 which quickly transformed the way people consumed their music, worldwide. With that, came the idea of giving the consumers control over what music they would like to listen to and hence, began music streaming.
Sony Music Entertainment International chairman and chief executive officer Edgar Berger commented: “Music has always been at the forefront of the digital revolution, leading the way for other creative industries and defining the future of digital entertainment.
“Today music’s digital revolution is moving to the next phase as consumers embrace streaming and subscription models in markets around the world.”
On the local front, digital media streaming as well as music streaming, has also grown increasingly popular among Malaysians.
In fact, it has grown to become part of our everyday lives, especially with telecommunication companies rapidly expanding their network reach across Malaysia.
According to Malaysian Communications and Multimedia Commission’s (MCMC) report, broadband coverage for the first quarter of 2014, has reached over 67 per cent.
With better access to seamless internet as well as the affordability of owning a smartdevice, thanks to the recent mass production of smart gadgets, streaming digital media in Malaysia has become more practical and affordable.
Max Hole, chairman and CEO, Universal Music Group International affiliated to the International Federation of Phonographic Industry’s (IFPI) annual digital music industry report for 2013, said: “The recorded music business remains challenging — good news includes the growth of streaming/subscription, and the continuing explosion of mobile devices means we can reach millions of consumers in emerging markets for the first time.”
In the local music industry, while Malaysia is not a huge player in this scene its local artists as well as the industry are also gaining from this influx in streaming services.
Young captive market
The idea is to capture the young market: a generation with limited income, driven to look for cheaper or cost-free alternatives to get their daily dose of entertainment.
And this idea, after much research and development was captured by pioneering music streaming platforms Pandora and Spotify.
Apart from offering a fixed playlist for consumers, these platforms have also presented consumers the freedom to choose their music from a massive library of songs at the price of a small amount of subscription fee.
This is one of the main factors that has been viewed as the key to capturing the music industry’s major consumers, the young generation, which is also the group of consumers that are most likely to pirate content and are least likely to pay for music content.
For the past few years, this method with a little publicity support from celebrities and music artists is quickly transforming the music landscape for the better.
Furthermore, with its subscription-based business model, the previously stagnant industry is finally seeing some light.
According to global information and surveyor Nielsen Company (Nielsen), while overall music sales, including albums, singles, music videos, and digital tracks, were down 6.3 per cent, streaming consumption grew a whopping 32 per cent since 2013.
In a 2013 report, Nielsen noted that overall music streams increased to 118.1 billion, while overall music sales were down 1,556 million from 1,661 million in 2012.
A spokesperson for BPI, a music industry trade body in UK, was quoted by BBC in a 2014 report as saying: “Last year we saw some growth in music industry revenues – the first time in ages.” He added: “We’re pointing forward again and streaming is helping with that recovery.”
So how did this method become successful, now, and how did these streaming platforms lure consumers from the comfortable clutches of digital piracy?
For the increasingly popular music streaming brand Spotify, managing director of Spotify Asia, Sunita Kaur highlighted, a key part of the success of Spotify has been in ensuring that service has a free tier option.
“By offering this free tier, Spotify is able to compete with piracy on cost and bring music consumers into the legal framework.
“From there, Spotify does a very effective job at converting those users into Premium subscribers. This theory that ‘given a free and legal alternative, people will pirate less’ has been proven over the last five years with significant reductions in piracy across the territories where Spotify is established,” she said in an email interview with BizHive Weekly.
According to Kaur: “If you look at our mature markets such as Sweden where Spotify is by far the most popular music service, the industry has experienced an amazing bounce back from the piracy doldrums of ten years ago.
“In the first half of 2012, digital downloads and streaming accounted for 64 per cent of the total market, with 90 per cent of those digital sales coming from streaming services.”
Sinking the pirate’s ship
In Asia, where piracy is rampant and difficult to curb, Kaur pointed out piracy remains Spotify’s biggest challenge in the region.
“Most of Spotify’s users report having paid little to nothing for music before joining, which is typical of younger music fans around the world who largely consume their music through YouTube and other poorly controlled, poorly monetised channels,” she said.
Nevertheless, Kaur said, the positive side is that record labels are always excited about having Spotify into a country, especially in emerging markets. She added, this is because it’s very easy to tell somebody “stop downloading music illegally” given that there is a better alternative for them.
“In the Asia Pacific, piracy has decreased by 20 per cent since we launched Spotify in Australia two years ago, which is our most mature market in the region. This proves that locally, every music fan we switch from piracy to legal, monetised streaming is having an impact. We’re hoping to have the same impact on piracy in this region.”
So, what has been its strategy so far, in this region? Kaur explained that its mobile-first strategy has been very important here in Asia, as Spotify was first introduced to Asia as a free on mobile service in December last year.
“Looking at the numbers, the mobile-first strategy has fuelled growth in our user base, which has subsequently bumped up Premium subscriber numbers as well based on an average conversion rate of about 20 per cent,” she added.
“In markets with a high smartphone penetration like Malaysia, we’ve seen huge spikes in user growth since this announcement, with mobile streams going to as much as five-folds compared to the previous year.”
Of note, Spotify arrived at Malaysia’s shores in April last year. Kaur revealed, in just over a year since it was launched in the market, Malaysian music fans have created over two million playlists.
In addition to this, she notes most of Spotify’s users listen to over 12 million songs a week – which is almost 70 years of music played back to back every week.
“Recently, we’ve revealed interesting insight on our Malaysian music fans which reflect just how our user growth and engagement in the market,” she commented.
Kaur further explained, Malaysians are heavy desktop users, with 33 per cent using this platform to access Spotify as compared with the rest of Asia at 24 per cent. Desktops are also the preferred streaming choice at 54 per cent, while 39 per cent of users use their mobile phones to access the service.
“As for our audience, in Malaysia, Spotify is dominated by male listeners (60 per cent), and female listeners (40 per cent), that are from the 15 to 34 age group.
“This means majority of our fans here are made up of Millennials, who are always on and in tune with the latest mobile, lifestyle and music trends.”
Another interesting fact she revealed is 35 per cent of Malaysian music fans stream the most songs at 12pm to 6pm while Spotify’s top streaming hour for mobile is at 10pm on Sundays and surprisingly, for desktop, its peak streaming hour is 4pm on Wednesdays.
On supporting the local music scene, Kaur highlighted, “We support local artists not only by paying them beyond that of other video and radio services, but we also provide them an opportunity to showcase their talent on a global stage and access to a massive audience.
“In Malaysia, as with the rest of Asia, we are working closely with artists and labels to add local content to become the most global, international music streaming service available.”
Earlier this year, Kaur said, Spotify showcased Malaysia’s breakthrough artist, Yuna, for its very first Spotify Session in Asia.
“Spotify Sessions are intimate, exclusive performances by today’s most exciting artists, exclusively available on Spotify.
“Yuna also curated an exclusive playlist (Songs I’m Falling For) to coincide with the launch of her Spotify Sessions recording on the service.
“Last month, we also organised our first local Media Showcase with PAYSLIP, an exciting new act signed on by Warner Music. We’ve worked with them to release their first single, “Syurga Sang Pencinta”, as well as their self-titled debut album on Spotify,” she added.
“When looking at music trends across all of the different countries, every country is very passionate about their local artists, and Malaysia is no exception.
“Hence, it’s not just the big international stars that dominate the Asian charts, but the spotlight is also on our homegrown artists.
“Music fans in Asia are also very passionate about their local music scene, which enables us to provide homegrown artists with a platform to showcase their talent,” she explained.
Kaur further optimistically expressed that Spotify looks to opportunities than challenges in the region.
“Apart from the fight against piracy, marketing to different cultures is a good challenge to have, as it drives us not to have a cookie cutter strategy that can be used across each market.”
In Asia, Spotify is being fully localised for music fans in each market, with a very broad and deep catalogue of local music, she noted.
“We would like to ensure that we have the best content available — from the local artist hits to international favourites — so we are working closely with artists and labels in Malaysia to ensure we have the most extensive catalogue in the market.”
Kaur added, Spotify’s long term goal in Asia is to expand its footprints in every country in the region. “Spotify is a fully licensed and legal service, so to launch we need appropriate agreements in place with rights holders; labels and collecting societies. We believe that if you’re going to roll out a music service to music fans who demand excellence, you want to be sure everything is perfectly in place for launch.
“We ultimately want Spotify to be available in every market in the region, so stay tuned.”
So far, Spotify is officially available in Singapore, Hong Kong, Malaysia, Taiwan and the Philippines.
As for plans in Malaysia, Kaur said, Spotify is looking to engage more Malaysian music fans by introducing new features and launching in-market activities and partnerships.
“Most recently, we’ve launched our family plan, Spotify Family, which allows one user to pay for Spotify Premium for the whole family.
“This means that each member can have their own separate discounted Spotify Premium account under one monthly payment, which makes enjoying music so much easier,” she added.
On that same note, late last year, Maxis Bhd had partnered with Spotify to offer special rates for its customers.
“Our partnership with Spotify is a perfect fit as it will set the bar for a new era of music in Malaysia.
“With smartphone penetration continuing to expand in the country, we are also seeing a surge in demand for music access on mobile devices. What’s bringing this partnership together is the fact that our customers can take full advantage of our fastest and widest network in the country.
“Our LTE customers, in particular, enjoy a greater Spotify experience, as they get to ride on speeds that are generally five to 10 times faster than 3G, which means an even more seamless Internet experience with greater download speeds.
“This adds a whole new dimension to their lifestyles, enhancing their overall experience in consuming music digitally,” said T Kugan, head of Digital Services of Maxis.
Meanwhile, in IFPI’s Digital Music Report 2014, Ken Parks, chief content officer at Spotify, believes music subscription has hit a tipping point.
“This is the way people are consuming music, so the debate about whether it’s a model to embrace has been put to rest over the last year. Unlike the distribution of physical product we can reach every person on the planet, at least every person with a smartphone.
“It opens up huge opportunities in the developing world, where countries have leapfrogged fixed line internet and gone straight to wireless,” he said.
What Sportify users say?
“I think this is an easier way of obtaining music. I like how I have almost complete access to millions of songs, across the globe, for a minimal fee. Before this, I’d rather rip it off a website or search the internet for free mp3s, or download it rather than spend about RM3 for just one song on iTunes.
“There’s value for money here, I think. The mobility and access are extra pluses and I’m willing to spend what I can get for with five songs previously, more than a million songs, now,” says Janet Lee, a 23-year-old fresh graduate and avid music listener working a minimum waged job.
For post-grad student, Stacy C, currently studying overseas, its ease of use makes it attractive to her. She told BizHive Weekly that she first subscribed as a Premium user to Spotify in Malaysia last year after observing the buzz it has made on the internet. She added, she was pleasantly surprised about how easy it was to switch the location of the programme and app when she had to move to a foreign country to continue her studies. “It’s easy to change it. I thought I’d have to start new playlists again, on a new account, with a different currency. But that isn’t the case for this,” she commented.
Hopping on the bandwagon
The success of music streaming pioneers such as Spotify and Pandora has led to many music streaming start-ups by various companies including internet titan Google and gadget giant Apple, with their respective Google Play Music and Beats Music.
Furthermore, IFPI, a non-profit organisation representing the recording industry worldwide, highlighted in its ‘Digital Music Report 2014’ that although international services have made more headlines in 2013, Asia is home to one of the world’s first music subscription services, KKBOX, which is now competing against the global players with its own locally-branded freemium service.
Founded in 2004, IFPI explained that the service, along with iTunes, helped fuel strong digital sales growth in its native Taiwan in 2013, with revenues up 46 per cent.
KKBOX also provides limited free streams for its 10 million-plus free users, and an unlimited, fully-portable, integrated mobile, tablet and desktop service for its 1.5 million-plus paying subscribers.
The service is currently available in countries such as Hong Kong, Japan, Macau, Malaysia, Singapore, Taiwan and Thailand. According to IFPI, like other digital services, KKBOX is competing on music discovery and curation as it is on distribution.
The report said, Chris Lin, founder and CEO of KKBOX, had set to create a superior experience for consumers used to free unlicensed services.
“It has built a differentiated music brand with quality magazine-style editorial, a move that has seen the company extend its brand into printed magazines and TV programming.
“The service became a hit in Taiwan and quickly launched in Hong Kong and other Asian markets. In 2013, it launched another innovation, ‘Listen With’, which allows users of the service to listen live with others with “70 to 80 per cent” of domestic artists using KKBOX,” it explained.
“We’re trying to build our service into a premium brand. You can get free music from YouTube, from piracy, but there’s something that you cannot get which is a closer feeling, closer distance with artists… interaction. That’s what we’re trying to build — a VIP-club type of feeling,” Lin said in the report.
Lin added, he is competing with 15 or 20 illegal services from China that are active.
“People call us the leading platform in Asia, but I in fact would say the leading platform is still piracy.”
Deezer has also made in-roads into Asia as well as Malaysia. DiGi.com Bhd had partnered with Deezer to offer its customers special rates and packages along with the app on smartphones.
Familiar with the digital scene with most of its media contents available on various digital platforms, Astro Malaysia Holdings Bhd (Astro) is also developing its own digital music streaming platform via an app called ‘Raku’.
While it has not been officially launched yet, a trial version of the app is already available on Apple’s App Store and Google Play for those interested to try out a home-grown music streaming app.
Is it the Swan Song for CDs and cassettes?
We have taken a look at how the music industry is quickly transforming with the presence of digital music and now, streaming digital music. But what of the traditional, physical format of music records such as CDs and cassettes?
These products have been viewed as still popular especially to vintage collectors and those looking to keep relics from the past. However, these buyers only make up a small portion of music consumers.
In a previous interview, BizHive Weekly observed this phenomenon and asked business owners on how they deal with the dwindling sell of physical music records.
A local business owner laments that the challenge of selling physical music records mainly comes from the growing digitalisation of music and piracy.
He said, now, his music store only sells niche CDs that are difficult to get online such as classic music, karaoke, and local dialects and local language (Bahasa Malaysia) music CDs and DVDs.
Wherever the music industry is going, the industry is undoubtedly at an interesting point of time as now, the development of the music industry, while still dependent on the sales of physical format of music, now rides swift digital streams.