Consolidation inevitable in music streaming

In a month, around 200 million people streamed music online last year, a recent media and entertainment report jointly published by consulting firm Ernst & Young (EY) and industry body Federation of Indian Chambers of Commerce and Industry (FICCI) claimed. This is a testament to the fact that music streaming is touted to be one of the fastest growing media in India. The report, crucially, points out that the popularity of video over-the-top (OTT) platforms will drive the music vertical as well.

“Content produced for the video OTT segment will begin to play a more important role in using and promoting music—akin to Bollywood’s link to music—and we could see a lot more music-led innovation from this segment,” the report argued.

According to the report, if YouTube continues to provide video content-linked music for free, the paid OTT music sector will reach 5 million top-end users by 2023, and grow to ₹2 billion in revenue, leading to consolidation in the music OTT segment.

This provides a massive opportunity for players such as the home-grown Bharti Airtel-owned Wynk, which has been one of the pioneers in the industry.

“It’s not a very profitable industry when you think about it from an OTT perspective. And the reason for that is very simple: music is often used as a supporting service to another business. For example, Wynk is a great asset where it helps create engagement among [Airtel] telecom users,” says Adarsh Nair, chief product officer of Bharti Airtel and Wynk CEO, to Fortune India.

He says that for the industry to stand up on its own, all parts of the ecosystem need to be put in place, and profitability can come only when there is a premium play. “Don’t you want to think about a proper plan that is ad supported or subscription-based? As an industry, YouTube is where people go for most of their music needs. The premium experience of music, that’s what OTTs are able to bring. Ability to listen to music without an app open, downloading on the go, etc. It’s high time that industry came together and started speaking about music as a viable segment,” he adds.

According to a 2020 study by market research firms Kantar and VTION, Wynk has 15% market share. According to Nair, the company is betting big on the creator economy. “Can Wynk be a platform where young artists are discovered, where they directly connect with consumers?” During the lockdown, Wynk came up with Wynk Stage which gave artists a medium to perform online concerts and connect them with their audiences directly. “That innovation came straight out of the pandemic. Premium artists were looking to connect with consumers, and their concerts had pretty much dried out because that requires physicality. As a part of Wynk Stage we also got a lot of DJs on our platform. We’re creating a platform for them to be discovered and give them employment and be found digitally,” Nair says.

Wynk is looking at capitalising on this format for the long term where digital can be leveraged to enhance the creator economy. Nair pointed out that today music as a business is not a differentiator. “I would now bet on mixed media. Many young people are into gaming or e-sports. Now they are watching gaming, video, and music all in one. They are watching influencers play sports. Short video formats are popular in India. We need to think, is there a premium play there?”

Nair would rather bet on premiumness than numbers. “Quality customers are our differentiator. What if 10 million people, who really care about a new experience, are willing to pay you ₹100 a year, wouldn’t that also be a very differentiated play in India, versus 100 million people, and you’re probably getting ₹2 on every customer using ads. Nothing right or wrong. I think Wynk will bet deeply on the first,” he argues.

Podcasts: A way ahead?
The EY-FICCI report points out that podcast business models will be largely creator-, community leader, and celebrity-led, and be used to build stickiness and subscriber bases for OTT platforms. “Very few standalone podcast platforms/creators will be able to generate subscription revenues on their own and we expect podcasting to remain ad funded in nature,” it said. It is estimated that around 40% of listening will move to podcasts.

While Wynk was one of the first-movers in music streaming, they didn’t concentrate on podcasts early on. “We truly believe that when you pioneer, there are certain things that blindsight you. While Wynk pioneered music, we did not pioneer podcasts and that has such a close adjacency to music,” Nair argues. “But today, we’re catching up way faster and going way beyond.”

Some of the trends in the industry, according to Nair, are podcasts, game streaming, short video formats, lean-in experiences, and ‘exclusive’ content. Today, Wynk has more than 65 million users, the company says.

“We believe that subscription is going to be the future. In the next two years, can we be the dominant players when it comes to subscriptions where premium media is concerned?” Nair asks. Another global trend that Nair is keenly observing is micro-transactions. “On Wynk Stage, if there’s a consumer who would like to send a personalised message to an artist, will he/she be okay paying ₹1 for that message? And that’s a business question we’ve been asking. And if the consumers engage, micro-transactions can be a very powerful media of extracting value for consumers and businesses. This could be a future business model and we’re experimenting with it.”

But consolidation is inevitable in the future and consumers will lead the reign of consolidation. “It will happen in the next three-five years. If you’re innovating and winning, we have a right to be here five years later, and if we don’t, then somebody else is winning. It’s going to be an intensely fought battle. In the next two-three years, the monetisation curve will work. That’s when music as a business will become really interesting. And then probably the call for consolidation will arise,” he says. Fortune India