Hot Seat: Axel Dauchez – CEO of Deezer

When Deezer raised $130 million last October, many observers tipped the music subscription service to win the race. Not so fast. With the arrival of Apple’s iTunes Radio – a streaming service not yet live in Australia – Deezer has another big rival in a field which already includes Spotify, Rdio and many, many others. For Deezer CEO Axel Dauchez, it’s a marathon, not a sprint. And the Frenchman doesn’t take the competition lightly. In recent months, Deezer has rolled out a raft of initiatives, all intended to better serve the artist community and push the brand to prominence. One is the Deezer4Artists function, an open application initiative that provides artists certified accounts, offers them the ability to customise their presence on the service and paves the way to earn royalties on extra content. In this part of the world, Deezer has partnered with a string of high profile festivals, including Bluesfest, Soundwave and Laneway, and last December the brand launched its “free” tier. The service boasts a licensed catalogue of more than 25 million tracks, and has rapidly expanded to more than 180 countries – but there are still some key territories yet to come online.

Deezer isn’t operating in the U.S. or Japan. Is that about to change anytime soon?
The reason not to be in the United States is not because of competition, but because of cost. Not the cost to the labels but the cost of the media and the indirect competition with iTunes…its local territory. There’s also time competition with Pandora , a totally different concept. Pandora is cannibalising the time. It’s harder to find your place in the market. It’s expensive to move to the U.S. to pay for the education of the U.S. market about subscription music services – although this is changing by the day. The more it moves forward, the more the U.S becomes a fruitful market. So we’re just waiting to move there at the right moment with the right partner.

You do have investment of $100 million-plus. Is America now something you might be able to fast-track?
No. That money is to finance our goal to be the first global service worldwide outside the U.S. If we’d have started in the U.S., we’d have become U.S.-centric. We really wanted from the very beginning to embrace the complexity of the world before going there. Because the other way, it doesn’t work. When suddenly you’re in a market so big, every product innovation, every resource, we have to succeed where we put the money.

And Japan?
Japan is a very specific market. Specific enough to not decide to go there quickly. Even not decide to go there with a low profile. It’s just a market that has to be dealt with specifically. The rights are concentrated and distributed in a specific way in Japan. iPhone is exclusive to one operator. It’s a huge market but you need to deliver specifically. Recently we’ve been picking up signs from the telcos and the Japanese rights holders and perhaps we will move ahead into Japan.

How are you injecting the $130 million funding into Deezer? 
There are four blocks to the investment. One block is about the product itself. We really invest a lot in the product. We keep telling ourselves that we’ve done 5% of the journey, and that’s just delivering properly 25 million tracks to the right people, in the right place, on any device at any time. Second is localizing the product. We now have 18 offices worldwide. On top of that we have 20 people in countries that are not covered by those, to make sure we can adapt our services country by country. And we have nearly 50 editorial staff worldwide. And that for us is the proof of differentiation. We want to be as good as possible on that. We don’t want to be perceived as an Australian service in Australia. We want to perceived as a global service that is designed for Australian people. That’s a signature of the investment.

The third field of the investment is the free service. Which is quite costly (to maintain), as you can imagine but important to get the word out about streaming. Cooperation will enable us to reach a billion physical users. It’s a huge opportunity but we have to finance it. The last block is, parallel to the free service, the telco deals. We’re now in 25 countries with a deal where we’re distributed within a telco tariff. But we’re also investing in marketing. We want to be investing in where the music is; in Australia, we want to be with the festivals, we want to be part of the music life. And we’re investing to make it very clear that in one year we are the No. 1 platform in the music industry in Australia, not only a tool to access 25 million tracks.

Globally how many users of the free service?
Globally, we are at around 10 million monthly active users

And how many paid subscribers? 
Four million.

What slice of the market do you want Deezer to be?
We have a goal. The official goal is to be 5% of the global market by 2016. I hope we’ll be much higher than that. In terms of what we want to change, I’d say two things – if in two years from now we haven’t invented enough new ways to engage people with music, I think we’ve failed in our mission. That is a strong goal for us. The second one is, when we decided to go everywhere, we didn’t just decide to go into emerging countries. We decided to go to every little country. The vision behind that is, today, the reality of music is that the market is structured by the distribution. African artists do not have access to the traditional distribution system. And so finally they’re underplayed versus what they should be.

We believe if you’re accessible everywhere, if you bridge all the barriers, if someone in any country could enter your service and then access your music worldwide, then you are finally offering to your artists the urgency they deserve. If we do so, the charts will change. Not just in the small country where the artist comes from. But the charts will change in the big, mature markets. Because the charts they’re experiencing in last 20 years are fake. They’ve just been reflecting the local creation. So if we have a second ambition, it is to break down those barriers, and to liberate, to unleash the creation. That’s a big thing to do.