Deezer, which has 6 million subscribers and 16 million monthly users, is hoping to gain a foothold in the U.S. market by attracting previously under-served consumers. Deezer Elite exemplifies this approach. Subscription services typically emphasize mobility. With its high-quality audio, Deezer Elite emphasizes home listening. Murphy says this strategy of segmenting the market has worked thus far: Deezer has 100,000 U.S. users -- both free trials and subscribers -- fewer than 90 days after launching.
The company also hopes to reach new customers by offering a mix of audio and talk. Its acquisition of Stitcher will give users the ability to follow favorite podcasts and learn about new ones. Deezer may be onto something -- Apple acquired Swell, a service similar to Stitcher, back in July.
Billboard: Deezer is barely known in the United States. How are you going to change that?
Beth Murphy: We want to grow the category with a differentiated offering. Right now the music streaming subscription base is about 30 million users, but there are 2 billion users that are listening to music. The category is really nascent. So the approach Deezer is taking is to ask, "What are the ways we can grow the category to get new people into the category?"
Deezer Elite and the audiophile segment is one example of that. Talk is a similar example. We know that most consumers listen to music and talk at the same time. Terrestrial radio is a good example as well as models like Sirius that are much bigger than music streaming is today. By acquiring and integrating Stitcher into Deezer we can once again attract and engage streaming listeners in a behavior they're already doing. That will be the theme. It's not just a "me too" strategy where we go in, guns blazing, with a similar product. We really want to create something that's different as we enter the U.S. market.
Am I correct to assume Deezer really needs to go beyond the audiophile category and get into the more mainstream market? In other words, is this category that appreciates higher quality audio going to be enough or is that just the starting point?
I think that's just a starting point and it's been a good starting point. Since we launched 90 days ago we already have 100,000 users in this segment. So we think it's a big segment. But that's just one example. You'll see similar efforts from us where we're really focusing on a segment that's not currently being served well by streaming. There could be multiple examples of that, whether a genre vertical like Classical music, for example. Right now it's very hard for people to search classical music at streaming services.
I'm thinking about country music when I ask this question: how could Deezer reach out to the country audience, which has been slow to adopt subscription services. How do you reach out to them? Is it through marketing and advertising, or is there a way change the product itself that makes it more attractive to country fans?
I think it's the whole mix. It's the product, marketing and content mix. I think to date streaming has gone for the midpoint of music: either top 40 or the cool part of the market like indie music. But it really hasn't done a great job of hitting a majority of people listening to outside of those genres.
We would say it's a content, marketing and distribution approach. We launched Flow, which is our recommendation engine based on what you listen to and what's in your playlist as opposed to a specific artist or genre. So those are some of the beginnings to how do you really develop a tailored product experience. There's also a programming component to the category that hasn't been there that you see at other models. Let's say you're trying to super-serve country music listeners, there are probably things you can do on a programming and content perspective as well as a discovery perspective.
What attributes are needed to make an app -- not just a music app -- a really great experience?
I think it really needs to be simple and a lean-back experience versus a lean-forward experience. That's something we see at Deezer. We see users use features differently whether they're on web or mobile. When you're on web you might be more interested in grooming a playlist or learning about an artists, where mobile is more of a lean-back experience where you want to listen to music but you're not necessarily searching for specific things. I think that's true of most apps. They're simple, easy to use and appropriate for the use case.
Deezer has more or less the same catalog as its competitors. Its user experience is similar its competitors -- or at least it's more similar than it is more different. Other than improving audio quality, what can Deezer do to separate itself from its competitors?
I think that's where going to the original discussion about super-serving different segments becomes really interesting. I do think right now you have a competitive set where most features are very similar. We would say we do have the largest music catalog in the world. We have 35 million tracks. That's largely based on the fact that we're in over 180 countries and have done a great job of making sure the catalog is complete.
Aside from that, I think it comes down to how do you create easy-to-use experiences, making it really seamless and easy so more people enter the category. I think discovery will be something you can differentiate and over-deliver on in a way that's easy and lean-back. Whether that's improving and algorithm, but also getting to creating great experiences for people that are underserved, whether that's an audio enthusiast or a person that wants one product to listen to both music and talk.
And also I think there's a huge opportunity with how people listen to music. For example, the connected home and connected devices, how do music streaming services best create those integrated experiences? For example, the way people listen to services is an integrated experience in their homes. We think there will be additional layers to that, whether it's the iWatch or other hardware-audio experiences.
Where will majority of growth come, from a small number of developed countries or a larger number of other countries?
That's an interesting question. The U.S. is obviously a huge market. It's currently almost half of all marketing. But I do think as smartphones become cheaper you're going to see, in [Asia-Pacific] and a number of regions, the adoption of streaming will really take off. There's a huge opportunity for adoption of streaming from this younger generation globally.
Ultimately, the question is whether streaming will become the predominant form of music consumption. Right now it's between 10 percent and 20 percent depending on which study you read. The forecast is in five years that will flip and it will be 80 percent. So I think growth will come from established markets like Europe and the U.S. and we'll also see interesting dynamics in developing countries as well from a generation that never really had a radio dial or ever bought a CD.
Is Deezer able to adjust its prices in developing markets to better reflect per capita incomes?
I think you'll see players attempt to do that. I think that's the right direction. In order to do that we need to work with the music ecosystem and the labels to make the math work. I think that will be something that happens eventually. Because streaming is still in early days, I think the economics and the players involved have to align to make that economically feasible. I think we'll see more players start to get there and that will be really important to drive adoption.
You have previously worked at Stitcher, which Deezer acquired. Can you give me some insight into how Deezer is going to integrate podcasts into its product? How does it work mixing music and spoken word?
It needs to be a way that is seamless from a user interface perspective. I think the nice thing is a lot of the user interface metaphors are very similar between Stitcher and Deezer. From that perspective the integration is going to be pretty straightforward. A Stitcher user is a regular podcast user who might be an earlier adopter and familiar with lean-forward playlists experiences. The challenge is we're going to be introducing talk to a more casual listener who's discovering it through music. From a product perspective, we want to make sure your first experience is a great experience and there's a level of curation.