An Uber moment has come for SA music industry
THE South African music industry is about to be disrupted by Spotify, a European-based technology company and the world’s largest global music-streaming subscription service with a community of almost 160 million users, including 71 million paying premium subscribers.
The company is a music, podcast and video-streaming service that was officially launched on October 7, 2008.
It was developed by start-up Spotify in Stockholm, Sweden, and provides DRM-protected content from record labels and media companies. Spotify is a freemium service. Its basic features are free with advertisements or limitations, while additional features such as improved streaming quality and music downloads are offered via paid subscriptions.
Spotify is currently available in most of Europe, most of the Americas, Australia, New Zealand, and parts of Asia and soon Africa.
It can be accessed via most modern devices, including Windows, MacOS, and Linux computers, as well as iOS, Windows Phone and Android smartphones and tablets.
Music can be browsed through or searched for by parameters such as artist, album, genre, playlist or record label.
Users can create, edit, and share playlists and tracks on social media, and make playlists with other users.
Spotify provides access to more than 30 million songs.
As of June 2017, it had more than 140 million monthly active users and more than 70 million paying subscribers as of January 4, 2018.
Spotify pays royalties based on the number of artists’ streams as a proportion of total songs streamed on the service, unlike physical or download sales, which pay artists a fixed price per song or album sold.
It distributes 70 percent of total revenue to rights holders, who then pay artists based on their individual agreements.
Spotify has faced criticism from artists and producers including Taylor Swift and Thom Yorke of Radiohead, who argued that it does not fairly compensate musicians.
Uber moment
The arrival of Spotify in South Africa is an Uber moment for the music industry. In the same way that Uber disrupted the transport industry (specifically metered taxis) in South Africa, Spotify will do the same for music.
What will the arrival of Spotify mean for music consumers, artists, retailers and legislators?
Although similar service is not new as Apple, Google and other music platforms offer similar music-streaming services, Spotify will make a dent in the South African music industry.
Spotify was designed specifically for the music industry as opposed to other service providers, who are mainly hardware and software providers who happen to have a music streaming service.
Spotify is serious about music and as a result its entire value chain is designed to address the music industry. It is for this reason that the South African music industry should pay more than the usual attention to Spotify. The arrival of Spotify in South Africa will have its advantages and disadvantages.
For consumers of music it will mean more benefits as access to Spotify will mean access to more music than is currently the case with other providers.
In the near future, consumers will have access to Spotify via their cars through connected music system for cars. At this point in time there’s no reason to believe that consumers will suffer by subscribing to Spotify. It is the music entrepreneurs and artists that will have a double-edged sword as they make use of South Africa’s version of Spotify.
On one hand Spotify for music entrepreneurs and artists will enable access to markets within and beyond South African borders.
On the other hand, it might not always yield the kind of returns the industry would expect. Over time, Spotify could dominate the industry to an extent that its dominance may be abused by changing rules of the game, as we’ve seen with other platform companies that disrupt traditional industries.
The trend with platform companies such as Uber, Amazon and Netflix has been to start by appearing as if they support the industry, only to turn around and become the producer of content themselves.
Netflix, although it was started as a platform for distributing content, now produces its own content. Amazon has also adopted the same approach with publishers.
Music entrepreneurs will have to be more vigilant as they sign deals to use the Spotify platform.
In the short term the music industry in South Africa will have to unite to ensure that they get a fair deal from Spotify.
In the long run, the South African music industry needs to consider creating its own platform for the benefit of the local industry.
Legislators will also need to play a role to avoid what is happening in the transport industry with the war between Uber drivers and metered taxi drivers.
Although it’s already too late now, the legislators need to work out an innovative legislative framework to protect indigenous music and the South African music industry from exploitation.
While the entry of Spotify to South Africa should be welcomed with open arms and vigilant eyes, the rest of the African continent should watch this move and prepare themselves for the entry of Spotify to their countries and make sure that when they come there’s a win-win situation for the local music industry and Spotify.
Spotify is a freemium service. Improved streaming quality and music downloads are offered via paid subscription.
Wesley Diphoko is chief innovation officer at Sagarmatha Technologies and the founder of Kaya Labs. He spends his time developing building blocks for Silicon Africa and thinking about the Fourth Industrial Revolution in Africa.