Spotify Aus MD clarifies local market “absolutely not sustainable” comment

Spotify Australia’s Managing Director Kate Vale told media and marketing website Mumbrella the local streaming market is “absolutely not sustainable”.

Given Australia is the sixth largest music market in the world, PwC reports show we have embraced music streaming, a report from research company Roy Morgan has found 1.6 million Australian stream music on their mobile and ARIA 2013 Wholesale Figures showed 2013 was the first year digital overtook physical sales, we thought it best to have Vale elaborate: “The Australian market has over 20 music streaming offerings, making it one of the largest competitive landscapes in the world”, she told TMN this morning.

“We certainly believe that any competition is good competition and the crowding is a great indication that Aussies have taken to streaming. The more players in market, the more people trying streaming, which is great for the industry and great for us. But music streaming is a low margin business at the moment and having this amount of players in such a small market will not be financially sustainable for many.”

Vale told Mumbrella on Tuesday similar markets to Australia generally have “three or four players maximum” that succeed, and while Vale didn’t name which local services she sees as survivors, she did tell TMN Spotify’s lasting competitors will need to tick three boxes.

“It’s not my place to say who will or won’t survive but I will say that survival will likely come down to content, innovation, and being able to provide the most seamless music experience possible across desktop, mobile and tablet devices, in your home and while you drive,” Vale said. “I think Spotify leads in all these areas, and we’ll continue to make sure we do so.”

On an international level, US reports for 2013 (using RIAA figures) show streaming is up 49% on 2012, despite its 21% share of recorded music revenue. Spotify is currently more popular than iTunes in many European countries; is second behind iTunes globally; has generated $1 billion for artists and labels (Spotify pays 70% of its total revenue to rights holders);  has launched throughout Asia including Hong Kong, Malaysia, Singapore and the Philippines in the past 18 months; and currently holds approximately 70% of the streaming market (Neilsen SoundScan) with 24 million active users and six million subscribed users.

At just two-years-old, Spotify is arguably the most talked about streaming service, and with media classing it against similar services like Pandora, Rdio and Deezer, Vale says we’re missing the point entirely.

“People like to compare us to this competitor or that competitor, but our biggest competitor, hands down, is piracy. Around 2.8 million Australians download music illegally via file sharing networks every year, three quarters of these claim to download every month. On average, Australians illegally download approximately 30 songs a month, which totals a staggering one billion songs per year.

“More than half of these people admitted they feel bad that artists lose income because of illegal file sharing activity and for many of these people, they had never had a legal alternative of consuming music for free, until recently. Around 70% of our free users – potentially those who have pirated previously – say they are happy to listen to ads so that they are giving back to the industry. This is a great place to be.”

Vale anticipates the Australian market will follow countries like Norway where years of lobbying for tougher anti-piracy laws saw music revenue rise exponentially and piracy drop to less than one fifth of the original level. A report published by Ipsos found 47% of people surveyed (representing around 1.7 million people) said they use a streaming music service such as Spotify.

“It’s a really exciting time for us, and a really exciting time for the industry.”

According to Music Week, Spotify will also launch in Brazil this year. The news comes after the service postponed a launch slated for last September, the halt was reportedly due to negotiations with local labels and tax and legal complications.