From Diljit Dosanjh to Nick Jonas and even Elvis Presley, among others now reside in your phones thanks to an array of music streaming services such as Apple Music, Spotify, YouTube, among others. While Covid-19 helped in accelerating the growth of audio streaming platforms, in the last few years, the industry has also received a boost due to various in-home devices such as Alexa and Google Home. Case in point: Approximately 50 million monthly active users were on-boarded during FY21 and FY2, as per a recent report by Redseer Consulting, a market research firm. The report states that the sector has also grown 1.6 times in the last three years to reach 460 million streams per day as compared to 290 million streams in FY20.
How it all began!
It all began with initially telecommunications players offering music as an extra service, not to mention music apps also tied-up with these operators. From then to till now there has been a dramatic shift with both to the inherent value of music and the literal value that people are willing to pay. Technology and new business models have completely changed the established distribution channels that have long-served the music industry. “This transformation provides opportunities that will be larger and more rewarding to the artists and the industry. We are in our own lane: YouTube is the only platform where artists can create content strategies that are right for them across various formats, while building a community of fans and ultimately earning money from multiple revenue streams,” Pawan Agarwal, director, Music Partnerships (India & South Asia), YouTube, said.
To be sure, even as audio OTT market witnessed a rise in user numbers between the age of 18-30, the industry witnessed a growth in the user base aged more than 40 during lockdowns. Tier 2 and 3 cities’ controbution to listership too has grown yet more than 60% of streams still come from metro cities. “ When Spotify launched in India four years ago, there were five to six existing players in the market. Over the last four years, we’ve deeply localised the product, premium plans, our communication with the consumers, and collaborated with brands to advertise effectively on Spotify. We’ve also worked closely with the creator community, taking them to a wider audience not just in India, but to the world. This has enabled our growth in the market – brand love for Spotify is at an all time high at 73%,” a Spotify spokesperson, said.
YouTube versus Spotify
While Redseer report states that in last three years Spotify has gained the highest numbers of users with 26% share of total streams, Google claims that YouTube contributed over $6 billion to the music industry from July 2021 to June 2022, with over 30% coming from user-generated content. “We’re building a connected music experience across all music formats for fans and artists. We are working hand-in-hand with the music industry to build the best music experience for every music fan to discover and consume all music formats that is short and long form,” Agarwal explained.
Meanwhile, Spotify which recently released its Q1,2023 financial stated that mnthly active users grew 22% to 515 million, when compared to same period during the corresponding year. “We continue to be the most engaging platform in terms of time spent by users on Spotify, and are also seeing growth in our premium business. With continuous efforts to communicate with a large demographic base, across age groups via mass media and universal human insights, the brand love among 25-44 year olds has grown to 79% in 2022. Google search trends show that Spotify has moved from being at number three at launch in 2019 to becoming number one in May 2021 and sustaining that to date,” a Spotify spokesperson explained.
The revenue matters
Revnue from subscription has increased as it accounts for approximately 48% of the total revenue generated in FY23 from just 37% in FY20, Redseer stated in its report. Approximately five percent of monthly active users are paid subscribers with metros accounting for more than 80%. According to the report, with the growing diversity of packs, the number of subscribers has continued to grow. Furthermore, the average revenue per user has been between Rs.60-70.
Google claims that YouTube has surpassed over 80 million music and premium subscribers, including trialers as of September 2022. In January 2023, the average artist’s audience of unique viewers was increased by more than 80% thanks to fan-uploaded shorts featuring their music. According to Agarwal, Google is committed to becoming the number one source of revenue to the music industry, “Our twin engine of revenue has helped us become a trusted and fruitful platform for our music industry partners – label, artist and publishers – the relationships of which have never been stronger,” he added.
While Spotify stated that premium Subscribers grew 15% year-over-year to 210 million with outperformance across all regions, led by Europe and Latin America. Total Revenue grew 14% year-over-year to €3.0 billion, led by subscriber gains. The company claims that it was aware before launch that India will be a predominantly ad-driven market in the foreseeable future, “So we’ve worked with more than 300 brands here to grow our ad business. Our Premium team has also addressed several barriers to grow the subscription business in the market. Through several premium plans and payment options, we want to make it as convenient as possible for our local users to access Premium. We recently launched UPI for recurring subscriptions and free trials,” a Spotify spokesperson said.
Speaking on the subscription business, a Spotify spokesperson said, “Our premium team has also addressed several barriers to growing the subscription business in the market. Through several Premium plans and payment options, we want to make it as convenient as possible for our local users to access premium. We recently launched UPI for recurring subscriptions and free trials, and as one of the few players in the market who offer this, we are seeing huge adoption for premium/trials.”
The Sweden-headquartered company’s ad revenue grew 17% to €329 million, a 17% increase from €282 million in Q1, 2022. While there is a growth in year-on-year numbers, there has been a 27% decline in quarter-on-quarter numbers.
“We knew since before launch that India will be a predominantly ad-driven market in the foreseeable future, and so we’ve worked with 300+ brands here to grow our ad business.
We have ambitious goals to grow the audio streaming market in India, and will invest in campaigns, creators, and experiences that drive our growth,” added the spokesperson.
This is not only the case with Spotify, though. The recent Q1, 2023 results of Aplhabet Inc, Google’s parent company showed that YouTube witnessed a decline of 2.5% in ad revenue. According to experts, this is the second consecutive year that YouTube has witnessed a decline in its ad revenue numbers.
Commenting on generating revenue, Pawan Agarwal, director, music partnerships (India and south Asia), YouTube said, “We are committed to becoming the #1 source of revenue to the music industry and our twin engine of revenue has helped us become a trusted and fruitful platform for our music industry partners – label, artist, and publishers.
According to YouTube, it has surpassed over 80 million music and premium subscribers, including trialers as of September 2022 while claiming to contribute over $6 billion to the music industry between July 2021 and June 2022.
Vernacular: a new market?
The market continues to evolve as vernacular has become the fastest-growing genre in the last four years, according to the RedSeer report. Vernacular has grown in stature with Punjabi being the highest contributor in OTTA with non-film genre music. Punjabi streams have managed to capture 39% of the market, followed closely by Telugu, Malayalam, and Kannada with 19%, 15%, and 6% respectively.
In addition to this, international music streams went up by 11% as the OTTA platform attracts first-time internet users to its platforms.
The audio over-the-top market in India would be worth $2.5 billion by 2030, according to Statista. While the industry continues to grow, the declining ad revenue is a cause of concern to the entire market. The future of revenue generated by ads seems uncertain.