Streamers Battle For Africa: No Front-Runner Yet as Spotify, Spinlet & Others Fight for Market Share
"If the streaming platforms are patient, things are going to fall their way," says one major label exec on the potential payoff as the continent skews younger and more tech-savvy.
LAGOS, Nigeria — On a May night in the Lekki District, the emerging rapper Santi filled a small theater called The FreeMe Space with young locals eager to hear him perform songs from his latest album, Mandy & the Jungle. Most of the concertgoers had discovered him on streaming platforms like Spotify, Apple Music or the Nigerian service Spinlet -- all of which are that much more important in a country with few record stores. The packed theater was a sign that streaming is taking off in Africa, allowing local acts to develop bigger fan bases.
Right now, several streaming services from Europe, the United States, China and Africa itself are competing for the Nigerian market as well as that of the entire continent. So far, though, no clear front-runner has emerged. "I have no clue if any platform is winning over the others," says Santi, 27.
Amid a disparate market of 54 countries and hundreds of cultural groups, the early entrants to the African market -- particularly countries like Nigeria, Senegal and Uganda -- are still struggling to capture market share, according to executives at labels and streaming companies. And African companies are becoming frustrated with their own struggles to gain a foothold in the face of so much well-funded competition.
The potential payoff could be enormous, though. According to a study from the Brookings Institution, consumer expenditures in Africa are expected to rise from $1.4 trillion in 2015 to $2.5 trillion by 2030, making it one of the fastest-growing markets in the world. Nigeria, which now has 200 million people and is the most populous country on the continent, is expected to double in size by 2050 and overtake the United States to become the third-most populous nation in the world.
The continent's "population is huge, very young, and will become technology-savvy," says Alfonso Perez-Soto, Warner Music Group's executive vp Eastern Europe, the Middle East and Africa. "Some things have to be done in terms of education and infrastructure, but if the streaming platforms are patient, things are going to fall their way."
Over the past few years the major labels have made significant investments in A&R in Africa, and in 2018 Universal Music Group opened an office in Lagos, where Sony Music also has an office. Both Universal and Warner Music Group have signed multiyear licensing deals with Africa's largest streaming platform, Boomplay -- owned by China-based Transsnet Music Limited -- and all three majors have licensing deals with several other African streaming services as well as offices on the continent. Boomplay, which offers an app along with phones the company sells, says it has 46 million users for its ad-supported service, though it has not reported subscriber numbers. The South Africa-based multinational mobile company MTN just launched the streaming service MusicTime! after closing another one.
Meanwhile, outsiders are coming in fast. Spotify launched last year in both northern Africa and South Africa, a country with one of the highest per-capita incomes on the continent; Apple Music has been operating in the nation since 2015. French streaming platform Deezer is going for a more "local-hero approach" by creating playlists with content catered to local needs, says Ralph Pighin, the company's senior vp Europe, Asia and Africa. And MTN partnered with Tidal in Uganda last year to give its 10.5 million Ugandan subscribers access to the Jay-Z-owned streaming platform.
"We know how passionate fans in Africa are about music, and we want to give access to as many as possible," says Claudius Boller, Spotify's managing director for the Middle East, North Africa and sub-Saharan Africa.
The variation between countries is enormous. While 51% of South Africans own a smartphone, according to the Pew Research Center, only one-third of adults in Ghana, Senegal, Nigeria and Kenya do. (By comparison, 77% of U.S. consumers have one.) Africans also pay the highest prices for mobile data relative to average monthly income in the world, according to the Alliance for Affordable Internet.
Most Africans also lack a way to easily pay for digital streaming. An estimated 60% of adults in Nigeria do not have a bank account, according to the most recent World Bank Global Findex database report. "The digital payment model is not something that the majority of consumers have adopted yet," says Pighin.
African companies also worry about competing with foreign ones. "It is tough to generate revenue in this industry right now," says Funsho Finnish, senior manager of media and entertainment for MTN Nigeria. It requires a "huge investment" to compete with international services to convince consumers to try the MTN app, and it's even harder to keep them on it. "The user experience is much better on Spotify," says Finnish.
Perez-Soto, who worked on developing new business models for Warner in Latin America when its market was less mature, sees similarities in Africa. After years of laggard growth, Latin America has had the highest combined physical and digital revenue growth, percentage-wise, in the world in the past two years, due to streaming revenue, which grew by 39% last year, according to IFPI.
The key is to have "boots on the ground," to understand the music and the consumer and, most of all, to offer excellent service, says Perez-Soto. "Mexico had a piracy problem, but it changed because the [streaming] services improved in becoming safer, cheaper and better quality," he says. "It appealed in many ways."
As in any market, companies with deep pockets have a significant advantage, says Adam Granite, Universal Music Group's executive vp market development. In addition to creating a user-friendly interface, streaming platforms must be patient as markets develop. But he still sees significant opportunity for African services: "The local platforms can gain parts of the market before the Western platforms come in."