Having recently launched in the United Kingdom, French music subscription service Deezer is to expand into a further 130 international markets.
The global rollout will see Deezer open in key European territories, including Germany, Spain and Italy and Belgium. The service will also commence operating in a number of countries across South America, Africa and South East Asia, according to Mark Foster, London-based managing director of Deezer U.K. Foster says the first of the 130 international Deezer stores will make its bow early November - most likely in Europe - with the global roll-out due to be completed "within the next three or four months."
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"By early 2012 we should be operational in most of those territories and in some it will be in partnership with a key telecom, like we've done in France and the U.K., and in others it will be just the standalone product," says Foster. Negotiations are at an advanced stage with telecom companies in approximately a dozen markets, he adds. Global licensing deals with all four majors and key indies are also close to being finalized following on-going negotiations with rights and content owners.
"One of the main reasons that we set up in the U.K as the first international territory outside France was that it provided a strategic platform to negotiate rights for the rest of the world," says Foster. "We're talking to [rights holders] about pan-regional and global deals for international product, but where they have strong local catalog as well we're negotiating those rights too."
"You have to offer a complete palate of content, whether it's local repertoire or global repertoire," he continues. "We'll be driving it region by region but [individual market launches] will depend on how quickly we can get editorial content up to speed. In each region we want to make sure that we've got relevant and current content to make it a viable product for local consumers."
Deezer declined to reveal the level of consumer uptake in the U.K. since launching early September ( Billboard.biz, Sept. 1 ), although Foster did state that he was "very pleased and very encouraged" by initial results. Like its France counterpart, Deezer U.K. has partnered with French Internet Service Provider and mobile carrier Orange for a bundled Deezer Mobile package. It also contains the facility for Facebook users to link to Deezer playlists and access a limited period free trial.
One market that Deezer will not be launching in any time soon is North America, however. CEO Axel Dauchez recently told Reuters that by ignoring the two biggest recorded music markets - the U.S. and Japan - the company was able to avoid the high costs that such an operation entails, as well as the protracted and complex rights negotiation, which long-delayed Spotify's U.S. bow.
"Spotify has placed a high priority on breaking the U.S. market and good luck to them. It's a difficult market to break and they're allocating a lot of resources to it. We've taken the strategic view not to try and establish ourselves in the U.S. in the short to medium term," elaborates Foster, who cites industry forecasts that by 2020 75% of global music consumption is projected to originate from outside America as an additional driver in Deezer's global focus.
"The U.S. is an expensive market to break. There's already a lot of well-established competition with the likes of Rhapsody, Pandora and Spotify. Clearly there is a lot going on already in the U.S., whereas in the rest of the world there isn't," he goes on to say, adding that Japan is a similarly cost prohibitive and complex market to break. "The key thing for us is to expand in stages where you can become profitable very quickly," he continues.
According to Foster, Deezer's France service, which launched in 2007 and has over 20 million users, will enter profitability by the end of this year. "To bite off the rest of the world, clearly there is going to be additional investment in order to be able to do that. But part of the strategic decision is: if we're going into all these markets can we make them profitable within the short to medium term? We don't want to be getting into huge amounts of debt, which will take years and years to cover. It's biting off the world in chunks where we'll be able to turn a profit within a reasonable amount of time."