Business

Deezer Finally Coming to America on Sept. 15

Deezer
Deezer

The world's second-biggest music subscription service is finally coming to the world's biggest music market. Deezer, which claims to have 5 million subscribers and 16 million monthly users over 180 countries, announced Wednesday it will launch in the United States on Monday the 15th via a partnership with home audio company Sonos.

Six-year-old Deezer has strong financial backing, having received $130 million in 2012 from Access Industries, the holding company that owns Warner Music Group. But it has chosen to bypass the United States and build its story elsewhere.

Tyler Goldman, CEO North America for Deezer, says the unique U.S. market demanded a different strategy. "We saw the U.S. was highly fragmented, and therefore there would be a need to tailor [the service] to the needs of different users to create value and drive adoption."

So the company is making sound quality its calling card. Rather than target younger consumers using a free service aimed at mobile listeners, Deezer will launch as a high-quality streaming service for an older or more affluent demographic of in-home listeners. Called Deezer Elite, the service provides in-home streaming at FLAC quality of 1,411 kbps, far better than the 320kbps -- or less -- offered by competing streaming services. Mobile listening on Deezer Elite is experienced at a lesser 320kbps audio quality, however. The service will launch with about 25 million of the service's 35 million tracks available in FLAC with more will add more over time, says Goldman.

Consumers outside the United States will eventually be able to get Deezer Elite. "It may or may not make sense to go after the high-quality user in the U.S., but since we can do globally it makes a lot more sense financially," says Goldman.

A unique distribution strategy recalls Sirius XM's relationships with car dealers. Deezer Elite will initially be available through Sonos -- the audio company's first global partnership -- and home integrators, the technicians that install audio and video equipment in private homes. That gives Deezer access to a large number of Sonos consumers who lean toward high-quality audio. According to trade group CEDIA, the Custom Electronic Design & Installation Association, there are 22,000 home installers in the United States. In addition, Sonos customers in the U.S. can sign up for a free, 30-day trial.

Goldman says Sirius XM informed Deezer's U.S. strategy. "Why are they successful? They have a great program of experiences for different market segments. Our feeling is there's an ability to do that on a global basis in many different use cases."

Deezer Elite has a higher price to match its high-quality audio. The regular price is $19.99 per month, double the standard $9.99 for advertising-free subscription services. But Deezer Elite subscribers can get a promotional price of $9.99 when they sign up for a year of the service or $14.99 when they pay month-to-month.

Deezer comes to the U.S. over 3 years after the arrival of market-leading Spotify, which has 10 million subscribers and 40 million monthly users in 57 countries. The market has numerous other competitors trying to take advantage of consumer's shift to streaming: Apple's Beats Music, Google Music Play All Access, Sony Music Unlimited, Rdio, Muve Music, Rhapsody and, later this year, YouTube Music Key. That's not to mention a host of Internet radio services like Pandora and iTunes Radio.

But waiting wasn't necessarily a bad choice. The music subscription market is still young. In 2013, there were just 28 million worldwide subscribers to subscription services such as Spotify and Deezer, according to the IFPI -- a figure lower than the number of Netflix subscribers in the United States alone. Subscriptions accounted for just 19 percent -- or about $1.1 billion -- of the $5.9 billion global digital trade revenue in 2013.

Citing low adoption in the United States, Goldman believes the subscription market has ample room for growth. "We're not trying to take customers away from anyone else."