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Spotify will launch in Japan by the end of the month,reports TechCrunch.
The news follows up on an earlier report in Nikkei this summer, which revealed that Spotify was working in tandem with Tokyo-based advertising giant Dentsu for this initiative. This tie up could prove especially valuable for marketing Spotify to Japanese consumers and securing brand advertising deals for the music platform.
Spotify CEO Daniel Ek announced on Twitter last week that the company had passed 40 million subscribers. With strong internet usage and a sizable population, Japan could be key in Spotify path to become IPO-ready:
- Japan is affluent and internet–connected. Over 90% of Japan’s 126 million-strong population is connected to the internet and, despite a reluctance to switch to smartphones, mobile penetration in the country reached 77% in by mid-2015, up 17.4% from the year before. Japanese consumers are also affluent. The country was 27th on the IMF’s list of countries by GDP per capita.
- But the country is a puzzling music market. Annual music sales are estimated at almost $3 billion — about one fifth of global recorded music sales (IFPI STAT). It offers massive potential to music streaming companies. However, music consumption habits in the country have not gone global yet. Most Japanese consumers still prefer to buy CDs. And from the business side, there's significant resistance from Japan’s record label incumbents who oppose the concept of free digital streams.
- Spotify's move has been in the works for a while. Spotify opened a Tokyo office 18 months ago, and started recruiting in the country two years ago. TechCrunch first reported that Spotify had plans to move to Tokyo in October last year. Waiting may have come at a cost. The popular messaging service Line embedded a music streaming service into its messaging platform in June 2015. Apple, Google and Rakuten, the country's equivalent to Amazon, have followed suit with rival music services.
- Playing the second-mover advantage. By TechCrunch's count, there are now about half a dozen notable music streaming services in the country. Spotify will hope that its competitors have sufficiently stoked consumers' readiness for music streaming products, so that it can time its Japanese launch to perfection, just as the country evolves towards digital. None of Spotify’s rivals have succeeded in generating strong revenues yet because of Japanese consumers’ unfamiliarity with subscription streaming services, according toNikkei.
- The quest for Asian expansion. Spotify first landed in Asia in 2013 in Malaysia, and has since expanded to Hong Kong, Singapore, the Philippines and Indonesia, where it most recently launched in March, and has its sight set on India next. APAC is a an attractive market to because of its massive population, which is growing in affluence, and increasingly connecting to the internet. Populations in India (1.3 billion), Indonesia (250 million), the Philippines (98 million), and to a lesser extent Malaysia (29 million) and Hong Kong (7 million) provide a huge pool of consumers for advertisers to tap into.
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