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What UMG and Boomplay's Deal Tells Us About the Future of African Streaming

Photo of Zach Fuller
by Zach Fuller

Universal Music Group have announced today they will be signing a landmark licensing agreement with Boomplay, Africa’s leading music streaming and download service, in a deal that covers multiple markets within Africa. UMG becomes the first major music company to license its catalogue to Boomplay, which has quickly established itself as the most popular streaming service in Africa.

Africa has regional potential for many kinds of industries, and media services such as streaming is no exception. UMG will be seeking to leverage first mover advantage in the region although context is key when it comes to understanding how much Africa as a whole can deliver in revenue terms in the immediate future.

An overview of the market:

The recorded music market in sub-Saharan Africa was worth about $300 million in retail terms in 2017. Streaming revenue was $17 million.Telcos are the key force in the sub-Saharan African digital music market, including MTN, which generates revenues of around $150 million a year, across 70 million customers

 The single most important reason for these differences is mobile data network availability and affordability. In China and India mobile data is increasingly widespread, making streaming a compelling proposition, but in most sub-Saharan African countries coverage remains patchy and expensive, though this will doubtlessly be rectified in the coming years.

With a population of one billion and around 120 million smartphones, sub-Sharan Africa is a region with clear scale and opportunity, but the lack of an established distribution infrastructure and shaky rights frameworks, coupled with lower consumer spending power, have long acted as brakes on the development of the recorded music business.

Macro overview:

The region represents 15% of the global population, but just 1% of the global recorded music market. Sub-Saharan Africa is a market of the future rather than today, with the opportunity defined by the following:

Demographics: Sub-Saharan Africa has a fast-growing, young population. Mobile phone subscriptions are now widespread and transforming lives across region. But, while mobile data and smartphones are beginning to accelerate, it is still early days. While the region’s 126 million smartphone users represent a meaningful addressable base, it is a much smaller subset of the overall market than in other emerging market regions.Telcos: The dominance of 2G in the region’s mobile market has resulted in a digital market that is predominately shaped by ring tones and ring back tones delivered by large-scale telco services. Safaricom’s Skiza has 11 million users in Kenya, while the pan-regional music portfolio of Nigeria’s MTN generates revenues of around $150 million a year, across 70 million customers. Three and a half million of those are ring tones subscribers, while the rest buy à la carte ring tones, as well as other music formats. With low credit card penetration and the absence of robust music market infrastructure, telcos have established themselves as one of, if not, the major powers in sub-Saharan Africa’s music market. Other than live, TV and radio plays, telcos are the biggest revenue source for many local artists. In a similar fashion to the development of Middle Eastern and South American streaming economies, market evolution will happen through, not around, telcos.YouTube: As with most emerging markets, YouTube is the biggest overall streaming service with more than 100 million users across sub-Saharan Africa. For most music fans in the region, it is their only streaming music experience and, other than radio and TV, is how they discover new music. YouTube is also enabling sub-Sahara African artists to reach global audiences, especially among the Nigerian diaspora. Nigerian Afrobeat artist Wizkid sold out London’s Royal Albert hall in September 2017 and performed at the O2 in May 2018. Meanwhile, Tanzanian Bongo Flava artist Diamond Platnumz embarked on a US tour in June 2018. Diamond Platnumz was quick to recognise the power of YouTube, launching his ‘A Boy from Tandale’ tour in Nairobi, Kenya, rather than his home market, because his team recognised that his Kenyan YouTube views outperformed those in Tanzania. His shift to a more western-friendly, commercial sound, incorporating English lyrics illustrates his belief that YouTube can help him reach global audiences. UMG will have noted this and their investment in Africa not only serves as a validation of the region’s growth but the monetisable opportunity of the wider African diaspora.

The music industry learned the hard way about missing emerging opportunities in digital. With the industry back in growth and adventurous on the acquisition front, this early adopter approach to Africa investment may well prove a wise move by UMG.

For more data and information, MIDiA Research subscribers can access the full Emerging Markets report here.

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