India’s Music Streaming Market: Homegrown Players Are Fast Losing Out in the World’s Second-Largest Market?

Indian music streaming companies continue to struggle despite their massive user bases and the increasing consumption of digital music. On the one hand, the homegrown players, including Airtel Wynk and Gaana, are cracking survival deals. On the other hand, global giants such as Spotify, Apple Music, and YouTube Music are strengthening their presence in India by acquiring local companies and their paid subscribers. Why are homegrown music streaming platforms struggling to capitalize on their local advantages?

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Isn’t it surprising that despite India’s immense population and rich musical heritage, local music streaming companies have consistently struggled to understand and cater to consumer preferences? This disconnect has led to their failure to attract and retain music lovers, ultimately resulting in business closures. Taking advantage of this situation, global players have rapidly expanded their presence in the Indian music streaming market.

In recent months, prominent Indian players like Airtel and Gaana cracked a desperate deal to avoid shutting down their music streaming services, while international giants such as Spotify, YouTube Music, and now Apple are making aggressive moves to capture the burgeoning market.

Just before confirming Wynk Music’s shutdown on August 27, 2024, Airtel announced a strategic partnership with Apple to offer Apple Music to all existing Wynk Premium users.

Similarly, in August-mid, Gaana, once a dominant player in India’s music streaming industry, was sold to Radio Mirchi for a mere ₹25 lakh (approximately $30,000).

Despite being valued at around $580 million and having raised over $200 million in investments since its inception in 2010, Gaana struggled to sustain. The company had even explored a potential merger with Airtel Wynk, a deal that ultimately fell through.

All these developments make us to think about the primary factors hindering the growth of local music streaming platforms in India?

Before we understand the factors contributing to the failures of these Indian music streaming platforms despite having massive user bases, let’s take a look into the size of the Indian music streaming industry!

The Digital Revolution in India

The last decade has seen a digital revolution in India, with the widespread adoption of the Internet fueling an explosion in music streaming. Today, Indians are enjoying a diverse array of music, both local and international, on their mobile devices and TVs.

What’s particularly noteworthy is that India is now the world’s second-largest streaming market, surpassed only by the United States in terms of total on-demand streaming (audio and video).

With a total of 891 billion on-demand streams year-to-date (as of November 16, 2023), India accounts for over 14% of global audio and video streams ing. This contribution is poised to grow further, given the market’s impressive 81% YoY streaming growth.

Factors Contributing to Failures of Local Players

One of the primary challenges most Indian companies face while operating and expanding their businesses is funding. Most companies shut down businesses due to financial challenges. Airtel and Gaana are no exception.

Gaana, launched in April 2010, raised nearly $200 million in total from major investors like Times Internet and Tencent. For years, it was the go-to platform for over 200 million Indian music lovers. However, despite its massive popularity, the platform struggled to stay on grow trajactory and keep operations afloat.

The challenges became evident as Gaana’s revenue declined drastically with each passing year – falling over 45% YoY in FY23 to ₹65 crore and plummeting by 80% YoY in FY24 to just ₹12.5 crore.

One of the primary reasons for this sharp decline in revenue was the difficulty in monetizing music in a price-sensitive market like India, where consumers are reluctant to pay for content that can be accessed for free through platforms like YouTube and Google.

To keep the platform afloat, Times Internet, which owned a majority stake, injected debt into Gaana at regular intervals. In July 2023, it provided a Rs 100 crore debt infusion, which was later converted into equity. Recently, Times Internet committed to an additional ₹10 crore debt injection, as indicated in its regulatory filings. Due to restrictions on equity investments from bordering countries, Gaana had to rely on debt rounds worth $90 million from Tencent in 2020 and 2021.

The sale of Gaana to Entertainment Network India Limited (ENIL) for just ₹2.5 million (₹25 lakh) on December 1, 2023, underscores its financial distress. This was a startlingly low acquisition price, especially given Gaana’s valuation of around $580 million at its peak. ENIL, which also owns Radio Mirchi, completed the acquisition deal in 2024.

Following the acquisition, ENIL shifted Gaana to a completely paid model, doubling the subscription fee to ₹599 per year. ENIL CEO Yatish Mehrishi also revealed a ₹15 crore investment in the first quarter of FY25.

The Case of Airtel Wynk Music: Challenges and Strategies

Similarly, Airtel, India’s second-largest telecom operator, faced significant challenges scaling its music streaming platform, Wynk Music.

Launched in September 2014, Wynk Music is currently available in India, Sri Lanka, and 15 African countries. As part of Airtel’s digital services division, the platform reportedly generates approximately ₹250 to ₹300 crore in annual revenue.

However, despite its reach and revenue, Wynk Music struggled to establish a sustainable monetization model.

In September 2023, Airtel sought to revitalize Wynk Music by integrating elements of the creator economy into its subscription and advertising models. The plan included scaling up Wynk’s digital concert feature by introducing interactive elements, aiming to create a compelling 5G use case and drive long-term data consumption, as outlined by Adarsh Nair, Chief Executive – Digital Services and Chief Product Officer at Airtel.

Despite these ambitious plans, the strategy did not achieve the desired results. Wynk Music offered a variety of subscription options, including a free, ad-supported version and premium plans that were frequently bundled with Airtel’s mobile and broadband services. However, the premium tier struggled to convert free users into paying subscribers effectively.

“In India, music streaming monetization is already low. Secondly, Airtel wanted to offer a better service in the music streaming space. Apple is an established player in the global music streaming space,” sources revealed to Moneycontrol.

To address monetization and user engagement challenges and to enhance its offerings, Airtel has entered into a strategic partnership with Apple. This deal represents a win-win for both companies, targeting Indian music lovers.

On one hand, Airtel will offer Apple Music subscriptions at a significantly discounted rate compared to Apple’s standard pricing. On the other hand, this partnership will help Apple acquire high-quality subscribers from Airtel’s vast user base of approximately 400 million. Apple Music is currently priced at ₹99 per month in India.

Global Giants Capitalize on Market Gaps

The Indian music streaming landscape is highly competitive, with numerous players vying for a sizable share of the growing mobile internet consumption. Key competitors include Gaana from the Times Group, JioSaavn from Reliance, and global giants like Apple Music, Spotify, Amazon Music, and YouTube Music. Despite the high levels of content consumption, these streaming services face significant challenges.

One key challenge is the issue of licensing rights, which can complicate the acquisition of music catalogs and drive up costs. Additionally, pricing strategies remain a complex factor, as providers must balance affordability for consumers with the need to generate sustainable revenue. This competitive pressure is reflected in the number of paid users among major streaming platforms.

According to ET, Spotify leads the India market with approximately 3 million paid users. In comparison, Gaana has around 1.4 million paid users, Wynk Music holds about 500,000, and Apple Music has 200,000 paid users.

It is worth noting that the number of paid subscribers of these top music streaming platforms is significantly lower than the total number of users, including those on free tiers. This highlights the ongoing challenge of converting free users into paying customers. Despite the extensive reach of music streaming services, which encompasses around 185 million users, only about 8 million are paying subscribers in India.

Among local players, Reliance JioSaavn provides one of the most budget-friendly music streaming options for its extensive base of over 100 million Indian users. Its ad-free Pro subscription is priced at just ₹89 per month.

Although JioSaavn may not be a major revenue driver for the company, it’s likely a strategic investment for Reliance, given its deep pockets. Unlike other local players, the Mukesh Ambani-led conglomerate can easily sustain the platform without undue financial strain.

A Key to Spotify’s Success

One might wonder how Spotify has managed to gain such significant traction in India despite being launched only five years ago, while others have been grappling with various challenges. This global music streaming service has thrived not just in music but also in podcasts. Its highest number of paid users in the country among all streaming services is clear evidence of its success.

The success of Spotify in India can be attributed to several factors. Its international reputation for high-quality music streaming, coupled with a user-friendly interface, has significantly enhanced its appeal. The platform’s sophisticated algorithms and personalized playlists have also played a crucial role in boosting user engagement and satisfaction.

Moreover, Spotify has strategically partnered with music labels, which hold the copyrights to the music streamed on its platform, creating a mutually beneficial relationship where labels often discover new artists on Spotify. This collaboration has led to substantial payouts – Spotify claims to have paid $7 billion in royalties to rights holders worldwide in 2021, more than double the amount paid in 2017.

Cumulatively, Spotify’s payouts to music rights holders reached $40 billion in 2024.

Although India is not Spotify’s highest revenue generator compared to the US or European markets, the company recognizes immense growth potential in the country.

Understanding the value-conscious nature of Indian consumers, Spotify adapted its pricing strategy to meet local needs. It introduced various flexible subscription options, including daily, weekly, and family plans, catering to user preferences and budgets.

To broaden its reach, Spotify has actively expanded its presence across various Indian languages, extending beyond metro areas into Tier 2 and Tier 3 cities. Embracing a philosophy of inclusivity, Spotify ensures that every user, regardless of their language, feels valued and catered to. “Our platform is for everyone,” the company emphasizes, “so each language is given equal importance.”

Spotify’s growth in India is also driven by the rising popularity of podcasts, fueled by a growing volume of India-focused content and an increasing number of Gen Z and millennials adopting new listening habits.

The Future of India’s Music Streaming Market

Overall, the Indian music segment grew a moderate 10% in 2023 to reach ₹24 billion, according to data from industry group FICCI and consultants EY. However, this growth rate was slower compared to previous years, partly due to certain music OTT platforms transitioning to paid models by either reducing or eliminating their free services.

In summary, although India’s music streaming market shows impressive growth potential, local players like Gaana and Airtel’s Wynk Music have struggled to maintain a foothold due to financial constraints and competitive pressures. Global giants are capitalizing on these gaps, leading to significant shifts in the industry landscape.

The future of the Indian music streaming industry will likely be shaped by factors such as the continued growth of the digital economy, the evolution of consumer preferences, and the ability of music service companies to address the challenges of monetization and user engagement.

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