Gallo gives Black Coffee nod to stir up streaming services
In a music industry now dominated by international streaming platforms such as Spotify and Apple Music, DJ Black Coffee’s recent investment in Gallo Music may be the missing piece that allows his own digital service to compete.
Lyndon Barends, a strategist for Lebashe Investment Group, which bought Gallo Music in March, said Black Coffee, through his company FlightMode Digital, now holds 20% of the record company.
Tiso Blackstar Group, the former publisher of Business Day and Sunday Times, sold its entire stake in Gallo Music to Lebashe’s Arena Holdings for R75m.
The deal is significant as it gives Black Coffee a strong music portfolio to build a credible music platform, while allowing Gallo to grow its revenues from its catalogue, which include many local acts, at a time when international record companies are looking to capitalise on the African sound.
Phil Chard, a music industry analyst and MD of boutique digital marketing firm Point Black, says the deal makes a lot of business sense for Black Coffee and his streaming platform GongBox.
“For quite some time he has been speaking about how he plans to develop that service into a platform for African music that caters to fans in a way that platforms like Apple Music and Spotify cannot,” says Chard.
The traditional music business model has changed over the past two decades with the rise of digital technologies disrupting sales, first with online purchases through sites such as Apple’s iTunes and more recently with streaming popularised by platforms such as Deezer.
Gallo has certainly embraced the new reality. Online music streaming has “helped the business grow substantially”, says Rob Cowling, GM at Gallo Music. “It continues to make up for the decline in physical sales by helping our artists reach larger audiences globally and thus also attracting new fans and online engagement.”
According to Statista, digital music in SA is expected to be worth $51m (R889.5m) in 2020, with $37m coming from music streaming and $14m from music downloads, supported by 10.2million users.
Founded in 1926, Gallo Music Investments is a music publishing and record company whose business involves the acquisition of music rights, as well as representing artists, recording, manufacturing, distributing digitally and physically and selling prerecorded music and video in SA and internationally under the names of Gallo Record Company and Gallo Music Publishers.
The company holds music catalogues — its most important asset — for a number of popular artists including Ladysmith Black Mambazo, Jeremy Loops and the late Oliver Mtukudzi.
That catalogue is perhaps what drew Black Coffee to the deal as it may help attract users to GongBox.
An important drawcard when setting up a platform would be an existing catalogue, Chard says. “Being able to plug a catalogue you already own and circumvent the expensive licensing deals that have seen platforms like Spotify operate at incredibly thin margins and also delay expansions into territories like India because of negotiation disputes is a great strategic move,” he says.
“Generally, labels make most of their money from catalogues rather than new releases,” says Wiseman Qinani Ngubo, COO at the Composers, Authors and Publishers Association (Capasso).
Capasso is a licensing and rights agency that collects and distributes royalties to music publishers and composers.
Gallo has one of the most extensive catalogues in the market, Ngubo says. “Should that catalogue be holistically digitised and exploited to the full extent on digital platforms, the potential is immense.”
The value of Gallo’s music library is certainly not lost on its owners.
Barends says they do not see these new technologies, especially online streaming, as competition. Rather, it is an opportunity to “breathe new life” into the existing catalogue for what is said to be the largest and oldest independent record label in SA.
He says they are open to buying up more music catalogues to add to their collection.
As much as it may be good for legacy operators such as Gallo to embrace the digital revolution, a partnership that sees Black Coffee’s FlightMode handling digital distribution and Gallo the music might be best.
Historically, record company-owned music-streaming firms have not fared that well, says Ngubo, citing The Kleek, Samsung and Universal Music’s streaming service for Africa, as an example.
“The costs of starting and running a streaming service are extraordinarily high, and it would be ill advised at this point” for Gallo to launch its own platform, he says.
“They have enough catalogue to benefit from existing services without the need to gamble on launching a whole new service. Plus the behemoths of streaming are already available in the territory; they have enough visibility and R&D money to outlast everyone else.”
The past decade has seen growing interest in African entertainment. International players such as Netflix have started investing in a number of locally produced television productions on the continent, including the launch of SA’s Queen Sono and Blood & Water in the past six months.
In music, the sentiment seems to be the same, especially from US-based players, says Chard.
Recently, Warner Music invested in Africori — said to be the largest digital music distribution company in sub-Saharan Africa. Downtown, which administers works by artists such as The Beatles, acquired Johannesburg-based music company Sheer Publishing. To top things off, Universal Music has launched DefJam Africa with a number of SA and Nigerian artists on its roster.
These deals have happened in the past two months.
“The world is coming and it is incumbent on the African music industry to ensure they have structures and strategies in place to capitalise on the influx of capital and interest,” says Chard.
The prospects look promising for Gallo even as the Covid19 crisis has further disrupted the music industry, but the label will not say what its plans are with regards to streaming. “It’s too early to say at this stage, but we still have a strategy session with Black Coffee’s team where no doubt such creative ideas will come to the fore,” says Cowling.