Telco Music Strategy Ironing Out The Strategic Kinks As Objectives Evolve

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The 20,000 Foot View In a few short years telco music bundles have gone from a useful ancillary revenue stream to a core component of the streaming landscape. Despite long standing issues about how success can best be measured, telcos continue to invest heavily in music deals that are unlikely to ever deliver direct profit but that instead help drive metrics across the rest of their businesses.  Meanwhile streaming services get otherwise unobtainable marketing support and rights holders get large revenue guarantees.  On the surface it is an everyone wins situation.  But under closer scrutiny it is clear that there are structural and partner issues that must be addressed if bundles are to remain a vibrant business stream.

Key Findings

• The number of telco music bundles has more than doubled, up from        live partnerships in July 2013 to        in October 2015
• Telco bundle strategy is into its third phase - Innovation, following Experimentation and then Maturation
• Label, telco and streaming service objectives are not always aligned and sometimes there are even conflicting priorities
• A degree of mistrust exists between telcos and labels
• Streaming services are placing greater importance on telco bundles 
• Activation rates, reduced differentiation and weak channel support are three priorities for bundle strategy
• The four product innovation focuses are mixed bundles, phased bundles, alternative products and emerging market products
• There were        million bundled music subscriber accounts in 2014, representing        of all global subscribers.  This will grow to just
       million at the end of 2015 with subscribers lost from Muve Music and other bundles offsetting growth else where
• Breakage licensing models are a key area of disagreement with labels remaining firmly wedded to the approach and telcos and music services pushing for usage models
• Labels, publishers and music services need to better define what the longer term market role of telco bundles should be and this needs to be grounded in establishing common objectives with telcos

Companies Mentioned In This Report: Apple, AT&T, Celcom Axiata, Cricket Wireless, Deezer, Deutsche Telekom, Digi Malaysia, Globe Telecom, KPN, MetroPCS, Muve Music, Now TV,        Omnifone, Rhapsody, Rogers, Sky, Spark New Zealand, Spinnr, Spotify, Telia, T-Mobile USA, Vodafone, YouTube, Yonder

Methodological note: For the purposes of this report MIDiA interviewed a dozen senior executives from record labels, music services and telcos on condition of anonymity. Their responses are aggregated and anonymised in this report.