Telcos And Streaming Services Partnership: An Indepth Look

Everytime I have asked someone why they get music from illegal download sites rather than digital streaming platforms, their response is always something like this;

“How can I pay a subscription fee every month and still use my data to stream music that’s not directly on my phone’s storage”

 To be fair, they are not to blame for two reasons. One, the internet – The rise of the internet boosted the use of music bootlegging sites and mp3 downloads and file-sharing software like Napster in the West. In Nigeria, it led to the rise of music blogs that uploaded songs illegally.  Today, we have a generation of young Nigerians that, maybe bought a few CDs towards the end of that (CD) era, but majorly got their music from peer-to-peer sharing or illegal downloads hence are not naturally inclined to pay for music. For them, streaming is more or less, a cultural shift.

Secondly, the nation’s economic forces disincentivize streaming culture. Although Nigeria has one of the cheapest data prices in Africa at $2.7 per gigabyte, it is still too expensive for many. Nigeria’s current cost of 1GB data stands at 4.2% of the minimum wage, which is much higher than the 2% recommended by The Alliance for Affordable Internet (A4AI).

This high cost of data caused by a  complicated mix of currency devaluation, inflation, and low competition in the telecommunication space, makes Nigerians reluctant to stream music especially since the songs are not locally stored on their phone.

The Current State Of Streaming.

Despite the evident obstacles, streaming is quickly becoming popular in Nigeria. Boomplay, the largest streaming platform in Nigeria has over a million users while Spotify which launched here in February 2021 had 87,000 monthly active users by the end of April that year compared with Audiomack’s 1.2 million.

 Factors like increased internet Penetration, ease of streaming, and maturation of the music industry have contributed to this acceptance. Streaming platforms have also sighted the opportunities here and are strategically positioning to gather a reasonable user-base here. – (The Boomplay app comes pre-installed on Transsion phones while Audiomack opened a Lagos office in 2020).

One of such strategic moves is the partnerships these platforms form with the country’s telecommunication giants. We’ve seen MTN partner separately with Tidal, Audiomack, and udux. Airtel also recently announced their tie-up with Spotify.

An In-depth Look At These Partnerships.

• While the populace might initially resist streaming platforms, they already have a trusted relationship with their network providers and this is the first benefit of these partnerships to DSPs. Streaming services can tap into a new large audience and increase market share very quickly. These partnerships with telcos also stamp them as credible players in the music space. Streaming services can also tap into the telcos direct customer billing and bundled data packages for monetization.

• Telcos are already familiar with distributing music with massive success in the ringtone/caller tune era. According to pulse.ng, “The Nigerian music ringtones market was estimated to have generated over N9 billion in 2014, through monetization of caller tunes”. With the fall of caller tunes and the rise of streaming, telcos, if they want a part of the music pie can either create their streaming platforms (MTN’s Musictime, Etisalat’s Cloud 9) or partner with one or sometimes more than one streaming platform. Partnerships will save them from the operational costs and the complexities of licensing master audio rights and publishing rights involved in running their platforms. The partnership can also help telcos achieve customer loyalty and affinity by adding value.

• One of the ways these partnerships play out is bundle packages – Telcos allocate specific data for streaming in a bundled package. Customers love bundles. According to a survey by Ovum (2019) across six different markets (US, UK, China, Brazil, France, Australia), 63% of consumers said they purchased a bundle of two or more services. Almost 50% of respondents said they purchased a bundle because “it was a good offer at the time of purchase,” while 32% said it was cheaper to buy a multiplay package than to purchase each service separately. MTN and recently Airtel offers free YouTube and Spotify data as part of their weekly and monthly data bundles.

MTN users can also access Tidal, Audiomack, and Udux with plans as short as three days which can also be bundled with MTN mobile data purchases – monthly access with data is N1,300, N625 & N550 for Tidal, Udux, and Audiomack respectively. This eases the problem of premium subscription payment which remains predominant as only account holders from a few banks can conveniently pay for music subscription especially with Apple Music and Spotify.

• Exclusive experiences can also be created for the consumers by these partnerships. Streaming services have a relatively closer relationship with artistes while network providers are closer to their subscribers. The combination of both parties is an avenue to bring artistes and fans closer.

 Last year, Udux and MTN came together to provide virtual streaming of one of Wizkid’s shows at the O2 arena for free to their subscribers and at a token for non-subscribers. Udux  leveraged MTN’s large user base for brand awareness and increased subscribers (if they employed a good retention strategy). However, both platforms benefited from the revenue generated from non-subscribers who streamed the event. Over 238,000 Nigerians reportedly watched the live stream.

Where Else Has This Worked?

Telcos have been bundling their phone plans with licensed streaming service subscriptions for almost as long as the format has existed, with the world’s current largest music streaming company Spotify, signing its first major carrier deal with Telia in Sweden all the way back in 2009.

• In India, Vodafone Idea (Vi) rolled out its music streaming service in alliance with Hungama Music, to strengthen its OTT content offerings and gain subscribers. Vi offered a six months premium subscription at no extra costs to its postpaid and prepaid customers.

•  Australian company Optus chose the multiple-partnership strategy by pairing with Spotify, Google Play Music, Pandora, iHeartRadio, and Guvera, making it the only telco in Australia to offer data-free music while Virgin Mobile previously offered Australian customers an extra gig of data exclusively for listening to music via Guvera.
• In Russia, Spotify Offered  6 Months of free premium via a partnership with one of Russia’s top telcos, Mobile TeleSystems (MTS), which had 78.5 million subscribers at the end of Q1 2020.