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David v Goliath: Deezer seeks musical edge on Spotify

Latest Update: September 12, 2017 | 189 Views
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LONDON – From Brazilian gospel to Puerto Rican reggaeton and Dutch hip-hop, music streaming company Deezer is scouring the globe for gaps in the market where it can survive and thrive against Spotify and Apple.

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The French firm has little hope of success going toe-to-toe with its far bigger rivals in the mass-market realms inhabited by the likes of Taylor Swift and Ed Sheeran.

Instead it is focusing on local music genres in fast-growing, often non-English language markets, areas where it believes it can steal a march. It is targeting local listeners while also looking to position itself for a global audience as a “cool”, non-mainstream alternative.

As part of this strategy, launched this year and called Deezer Next, it is dispatching local teams of “editors” to identify talent in niche genres and create original content, Netflix-style.

The aim is not only to differentiate its catalog but also to reduce its reliance on the record labels that take the lion’s share of streaming services’ revenue. It has 40 editors globally, and is looking to recruit more.

Deezer Chief Executive Hans-Holger Albrecht said he would target selected markets in Latin America, Asia and Africa where Spotify was not already predominant. They include Guatemala, Bolivia, Paraguay, Colombia, Nigeria, Senegal and South Africa.

“I strongly believe in the localisation of content,” he told Reuters. “While Spotify is mainly playlist-focused, we are betting on local differentiation, and this has helped us become number one in gospel in Brazil.”

But finding a path to profit represents a formidable task for the loss-making company.

It has a similar “freemium” to market leader Spotify, whereby it attracts users by offering advert-supported free access and charges a monthly fee of about $10 for the full service. However it has only 12 million active users – about 9 million paying – compared with Spotify’s 60 million paying subscribers, and brings in just a tenth of the Swedish firm’s $3 billion annual revenue. (For a graphic on global subscribers click tmsnrt.rs/2jb01Uu)

Deezer, controlled by billionaire investor Len Blavatnik, is nonetheless sinking tens of millions of euros into this local music drive. Its strategy is based on a bet that music streaming will continue to grow rapidly to eventually eclipse all other forms of music listening.

The paid streaming market is expected to grow 16 percent to $28 billion by 2030 in terms of annual revenue, according to Goldman Sachs

“Streaming is a very young market, with just about 10 percent penetration globally, so there is a lot of potential still,” said Albrecht.

Reuters.