Cost-focused, localised providers will be the long term winners in Africa’s fragmented music streaming market.
The provision for carrier billing and mobile money to pay for services will be key to motivating uptake as financial penetration in the region still remains low.
Boomplay will double down on its expansion into Africa, having recently raised USD20mn of funding from Maison Capital, Seas Capital and other undisclosed investors, bringing its total funding to USD25.5mn. Boomplay is an Africa-focused music streaming service operated by Transsnet, a joint venture between Chinese-owned handset maker Transsion Holdings and Chinese Internet tech company NetEase, and with 42mn monthly active users (MAUs) as of April 2019 it is currently the largest in Africa in terms of subscribers.
Preloading the Boomplay app onto every Tecno, Infinix and itel branded smartphone produced by Transsion has been instrumental to the service’s adoption. 85% of Boomplay’s MAUs are based in the African continent and largely centred in Ghana, Nigeria, Kenya and Tanzania, markets where Transsion itself enjoys strong traction. The handset makers’ focus on low price points and key features catering to the African populace, such as larger batteries and enhanced cameras, has seen it emerge to become one of the continent’s most popular smartphone companies (see ‘Local Assembly, Low TCOs Drive Smartphone Boom, May 24 2017). We expect even further upsides to the uptake of the service as more first-time smartphone users enter the market via the purchase of handsets manufactured by Transsion.
Ubiquitous Connectivity Underpins Music Streaming Services Uptake
Sub-Saharan Africa Mobile Forecasts
f = Fitch Solutions forecast. Source: Operators, national sources, Fitch Solutions
Boomplay will likely use most of the proceeds to acquire rights to more localised content, which has been a key part of its overall strategy. It has focused on partnering with independent African artists as well as with micro-labels, which are often overlooked by the bigger international streaming services. Independent creators are able to upload their music and music videos directly to the platform, and are paid royalties for every stream, reimbursed every quarter via carrier billing, mobile money or bank cards. The wide array of payment options available has motivated more creators to monetise their content on the platform, creating networking effects as more musicians getting on board Boomplay will inherently attract more subscribers. Expanding its catalogue of international content is also a priority, with its November 2018 deal with major music label Universal Music Group a positive step in expanding its library of music to cater to more audiences.
The music streaming competition in Africa remains very fragmented. Very few companies have a strong pan-Africa footprint; Boomplay’s uptake is strong in Nigeria, Kenya, Ghana and Tanzania as it has partnerships with mobile operators to support carrier billing and mobile money, although it also offers services in South Africa, Uganda and Zambia, and plans to expand further into East Africa. Spotify, on the other hand, is present only in South Africa, having entered the market only in early-2018 and making limited progress in its pan-Africa expansion. Other players do exist: Orange-owned Deezer has a wider presence as it followed the footprint of its parent, but its service has seen limited uptake. There are numerous other smaller music streaming platforms, such as Spinlet, iROKING, Joox and Deedo, but their geographic presence remains limited, and their library of content is small relative to Boomplay, which possesses the scale and the subscriber base to negotiate deals with bigger music labels.
We believe that costs will be key to uptake, and the balance will be skewed towards platforms that can provide localised content at the lowest price point. Platforms will need to lower the barriers of accessing paid services for consumers by focusing on offering carrier-based billing, as credit/debit card penetration still is low in the region and mobile money remains the main method of transacting in the digital economy. A general unwillingness to pay for music will also impede uptake, and could mean that subscriptions will be skewed towards the freemium offering, meaning that music streaming companies would need to focus on growing and expanding their ad business to generate revenues from advertisers instead.