Earlier this month, Spotify announced that it would expand its services to the Middle East and North Africa in the fourth quarter. Being the world’s leading music streaming service, Spotify has now penetrated thirteen new markets across the MENA region, with its regional headquarters based in Dubai. Since its founding in 2006, Spotify has acquired over 13 firms, gaining market dominance in various regions, yet will Spotify’s launch into the MENA region succeed given local competition and challenges?
In an attempt to achieve rapid market dominance, Spotify has tailored its service so that “music fans in the [region] can enjoy artists, albums, and songs across every genre for every mood and moment, all in a fully localized Arabic Spotify service with right-to-left text alignment.” In this way, Spotify not only aims to attract local consumers, but also independent artists who can use the platform to release their music without the need for a record label. By appealing to a wider range of artists, the Swedish company anticipates its success in the new market backed by the support of these artists as well as its consumers. Spotify even broadcasted its Arab Hub, a library on Spotify for Arabic music, in hopes that this will convince even more people from the MENA region to use Spotify. In addition, Spotify’s premium subscription will be made available at half the price (or less) of what consumers in countries such as the US and the UK have to pay. According to Michael Krause, Spotify’s managing director for Europe, the Middle East, and Africa, this decision was made to “adapt the pricing to local standards, [so as to] make Spotify Premium available to as many people as possible.”
Now, though these prospects appear promising, Spotify is entering an already established market, competing with recognized music streaming platforms such as Anghami, Deezer and Apple Music. Whilst Anghami is the most widespread music streaming application across MENA, providing music to over 40 million customers, Deezer recently signed an agreement with Rotana Record, the largest distribution label in the Middle East, which means they now have unique distribution rights to Rotana’s extensive network. These competitors certainly pose a threat to Spotify’s infiltration; not only does Spotify lack expertise within this market, but it also adorned with an ‘outsider’ image, which, along with domestic competition, might encumber the smooth entry into the market. Additionally, Spotify has experienced and will continue to endure regional challenges. One of the main issues is Piracy; Krause exclaimed that it “is still the majority of music usage” across the Middle East and North Africa, suggesting the possible reluctance of people to use an international streaming service, let alone pay for a premium subscription. Data prices, connectivity issues, billing issues as well as licensing issues are among some of the other issues that Spotify has faced in the past.
Nonetheless, Spotify’s regional managing director Claudius Boller remains confident that their move into the market will succeed. According to him, the firm is fully prepared to dominate the market given its protracted strategy plan, hence why Spotify is only entering the market now: “I wouldn’t call it delayed, I think it’s perfect timing. You need to be 100 per cent ready for the market. We don’t believe the right approach is to just launch your international product”.
Spotify’s course of action is justified by the fact that MENA is a large market with a sizable growth potential, thus requiring a substantial allocation of resources (from a legal and financial perspective), which needs to be put in motion correctly. Additionally, given Spotify’s recently dwindling financial progress, a successful launch into the MENA region is particularly important for the company’s survival. With this move, the firm, thus, hopes to achieve its first-ever operating profit. This would, in turn, also re-establish investor confidence, which declined sharply after its share price fell more than 9 percent earlier this month, following an announcement by the firm that it would further forgo profit margins to generate future growth.
Overall, evidences have shown that Spotify’s launch into the MENA region will prosper. MENA’s current music market is not yet saturated, and so will be able to house all of the competitors simultaneously. Given Spotify’s prolonged attempts to counter regional challenges as well as making region-specific alternations to its service, Spotify’s chances of success seem likely. And given Spotify’s connective base compared to its regional rivals, having affiliated with Google and Samsung to provide its service on over 250 hardware devices, it would appear likely that such market penetration will also foster positive profit margins, in turn reviving the firms’ financials.
Lilian Cohaus
In an attempt to achieve rapid market dominance, Spotify has tailored its service so that “music fans in the [region] can enjoy artists, albums, and songs across every genre for every mood and moment, all in a fully localized Arabic Spotify service with right-to-left text alignment.” In this way, Spotify not only aims to attract local consumers, but also independent artists who can use the platform to release their music without the need for a record label. By appealing to a wider range of artists, the Swedish company anticipates its success in the new market backed by the support of these artists as well as its consumers. Spotify even broadcasted its Arab Hub, a library on Spotify for Arabic music, in hopes that this will convince even more people from the MENA region to use Spotify. In addition, Spotify’s premium subscription will be made available at half the price (or less) of what consumers in countries such as the US and the UK have to pay. According to Michael Krause, Spotify’s managing director for Europe, the Middle East, and Africa, this decision was made to “adapt the pricing to local standards, [so as to] make Spotify Premium available to as many people as possible.”
Now, though these prospects appear promising, Spotify is entering an already established market, competing with recognized music streaming platforms such as Anghami, Deezer and Apple Music. Whilst Anghami is the most widespread music streaming application across MENA, providing music to over 40 million customers, Deezer recently signed an agreement with Rotana Record, the largest distribution label in the Middle East, which means they now have unique distribution rights to Rotana’s extensive network. These competitors certainly pose a threat to Spotify’s infiltration; not only does Spotify lack expertise within this market, but it also adorned with an ‘outsider’ image, which, along with domestic competition, might encumber the smooth entry into the market. Additionally, Spotify has experienced and will continue to endure regional challenges. One of the main issues is Piracy; Krause exclaimed that it “is still the majority of music usage” across the Middle East and North Africa, suggesting the possible reluctance of people to use an international streaming service, let alone pay for a premium subscription. Data prices, connectivity issues, billing issues as well as licensing issues are among some of the other issues that Spotify has faced in the past.
Nonetheless, Spotify’s regional managing director Claudius Boller remains confident that their move into the market will succeed. According to him, the firm is fully prepared to dominate the market given its protracted strategy plan, hence why Spotify is only entering the market now: “I wouldn’t call it delayed, I think it’s perfect timing. You need to be 100 per cent ready for the market. We don’t believe the right approach is to just launch your international product”.
Spotify’s course of action is justified by the fact that MENA is a large market with a sizable growth potential, thus requiring a substantial allocation of resources (from a legal and financial perspective), which needs to be put in motion correctly. Additionally, given Spotify’s recently dwindling financial progress, a successful launch into the MENA region is particularly important for the company’s survival. With this move, the firm, thus, hopes to achieve its first-ever operating profit. This would, in turn, also re-establish investor confidence, which declined sharply after its share price fell more than 9 percent earlier this month, following an announcement by the firm that it would further forgo profit margins to generate future growth.
Overall, evidences have shown that Spotify’s launch into the MENA region will prosper. MENA’s current music market is not yet saturated, and so will be able to house all of the competitors simultaneously. Given Spotify’s prolonged attempts to counter regional challenges as well as making region-specific alternations to its service, Spotify’s chances of success seem likely. And given Spotify’s connective base compared to its regional rivals, having affiliated with Google and Samsung to provide its service on over 250 hardware devices, it would appear likely that such market penetration will also foster positive profit margins, in turn reviving the firms’ financials.
Lilian Cohaus