Business is timing. Some companies enter a market earlier and develop a product at great cost. Others wait until market conditions are better. The former can often give an advantage to the earliest entrant, but consumers aren’t always ready for the first type of product. The latter scenario, when the market better appreciates a product, can be a good strategy.
?One leading music service has waited calmly to enter the world’s largest music market. Paris-based on-demand service Deezer is expected to launch in the United States in 2014, according to a major-label source. While a report claims Deezer will launch in January, Billboard hears the launch will likely occur later in the year.?
Deezer’s arrival suggests the U.S. subscription market is turning a corner. For years, on-demand subscriptions have suffered from a chicken-and-egg problem: They hadn’t gained enough momentum to attract the interest of major mobile carriers, yet the lack of mobile partnerships in the country has limited mainstream adoption of the services.?
The immature U.S. market has kept Deezer away. Instead of launching early, the company has been “prioritizing growing markets” with relatively low acquisition costs, a Deezer representative says. During that time, Spotify, Rdio, Rhapsody and Muve Music have assumed the time-consuming, costly process of showing the American public the merits of paying for access to music.?
The United States brings high costs with its high potential payoff. It’s a geographically broad and diverse country with the world’s third-largest population. A partnership with a mobile carrier would allow a music service to quickly reach a large audience while piggybacking on the mobile carrier’s marketing budget. For example, Spotify’s deal with Vodafone in Ireland will reportedly be backed by a $2 million advertising budget. On a per-capita basis, a $2 million ad budget in Ireland is equivalent to $137 million in the United States.?
A Deezer rep says the company “has been in discussions about possible strategic partnerships to speed up our launch in the U.S.” Finding a partner is a common process for Deezer. In addition to a partnership with Orange in its home country of France, Deezer’s partners have included T-Mobile in Austria, dtac in Thailand, Millicom in South Africa and Orange in the United Kingdom.?
The bigger the partner the better. Earlier this year, Deezer CEO Alex Dauchez told Billboard the company doesn’t want to enter the United States alone and be perceived as a middle-of-the-pack service. “Perhaps it’ll be an established, existing big company in the U.S., which will make us significantly the biggest [service] in the country.
“?Deezer’s arrival would give the United States the world’s two largest on-demand subscription services. Backed by a $130 million investment from Access Industries, owner of Warner Music Group, Deezer has more than 5 million global subscribers, up from 2 million a year earlier. Spotify, available in the United States since 2011, claims more than 6 million global subscribers, a year-old and out-of-date figure.?
But the only U.S. mobile carriers with music partners are two prepaid carriers. T-Mobile-owned MetroPCS offers Rhapsody for an additional $5 monthly fee. Cricket Wireless created Muve to bundle with its unlimited talk, text and data plans. The four largest carriers—Verizon, AT&T, Sprint and T-Mobile—have been slow to follow the example of foreign carriers.
?What’s good for Deezer is good for the competition. A mobile partner would help the late-arriving Deezer battle numerous competitors from a standing start. Beats Music, also expected to launch in 2014, is reported to be looking for a mobile partnership to aid its launch. Mobile partnerships would help other services attract more than the early-adopting, serious music fans they have lured thus far.