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Russian Streaming Startup Zvooq Has a Unique Strategy (and Just Received $20M in Funding)

The piracy-rife country has a new, above-board option for music streamers -- with a pricing twist to boot.

Russian music streaming service Zvooq has raised $20 million in Series A funding, led by Russian e-commerce company Ulmart with participation of Essedel Capital, a Finnish private equity fund. The capital injection is a sign of change in a country known as a haven for piracy.

Zvooq — Russian for “sound” — follows a familiar formula of pricing, access and catalog. The service has both free, advertising-based and paid, advertising-free tiers. It’s a multi-platform streaming service that can be used on PCs, smartphones and tablets. The service retains a catalog of 15 million songs, representing 500,000 artists and 25,000 labels.

But the service is also different from its peers. Zvooq operates in Russia, Ukraine, Belarus and nine other former Soviet republics, all markets with relatively little competition compared to Western markets. Deezer already operates in Russia. Spotify appears to be headed for the country. Zvooq is more like Russian services Trava, created by mobile carrier MegaFon, and Yandex.Music, two services created locally for the particulars of the local market.

Zvooq also has a different approach to pricing. Rather than charge a fee for unlimited, advertising-free access — the Spotify pricing model — Zvooq charges two monthly rates, 33 rubles ($0.91) and 66 rubles ($1.82), that lets users listen to three albums a day and seven albums a day, respectively.

The funds will have two primary uses. First, Zvooq will “bolster and promote” its platform that can integrate directly into social networks and cellular carriers’ offerings. Second, the funds will help begin a rollout into “certain developing world territories.”

Music is shifting from piracy to legal services in Russia. As the Moscow Times noted, new piracy laws in the country are helping nudge the market in a legal direction. In March, the lower house of the legislature passed a bill that would extend anti-piracy law to include all copyrighted works and related rights. Weeks later, the three major music groups charged Russian social networking site VKontakte with a $1.4-million damage claim.

Like elsewhere in the world, piracy in Russia is both a threat and an opportunity. Seeing the potential in the country of 143 million, Spotify CEO Daniel Ek said in a July interview that the country’s largest music site is VKontakte. “If we can turn those people into paying customers, the music industry would thrive.”

And that’s exactly how Zvooq is positioning itself. “We are bringing order to the chaos of the Russian music market,” said co-founder Victor Frumkin in the press release announcing the funding. “By delivering the best end-user listening experience and an easy-to-integrate service for our partners we create an enjoyable, legal music market that brings revenue and awareness to artists.”