African music streaming platforms proliferated ten years ago but many of them have closed over the intervening decade. Despite the hype, success in music streaming in Africa is a marathon not a sprint. Russell Southwood talks to Martin Nielsen, CEO, Mdundo about what's changed in the music digisphere and how he sees the future development of Mdundo.
Mdundo launched in November 2012 as a free-to-use music streaming platform supported by advertising. It allows local artists a platform to distribute their music and earn revenues based on the number of downloads they receive.
One of the big changes over its seven year lifespan has been the rapid increase in the use of smartphones:" We started with only 20% of users with Android phones and we now have 60%".
Mdundo lived through the years when music streaming in Africa and the music industry itself was being heavily promoted as the 'next big thing':"There were some years when the African music industry was very hyped but it has taken several years to get to its current stage where things are becoming more professional. Over the last 2-3 years, there has been some long-term thinking".
"There are now some long established African music streaming services including Tencent's Joox, Boomplayer, some of the mobile operator services and ourselves. The MTN takeover of Simfy is a significant sign".
"Music labels are a lot less significant than they were seven years ago. We've built a positive brand and they've already heard about it. They know it will work because it's been around for seven years. They're often quite positive and we can look at the opportunities together. Things are moving in the right direction in Nigeria. It's a more than exciting business already. We can use resources in terms of time and energy to see what works".
One of the biggest challenges as a free-to-use streaming service has been attracting digital advertising on to the platform but slowly the trend is moving upwards:"Things are moving in the right direction with year-on-year. It's early days and only a small percentage of spend is going into digital ads. There is massive room for improvement. It's only a small percentage compared to other media. The main spend is in Kenya and Nigeria. The other countries are just a drop in the ocean".
Nielsen sees this kind of music service as a long-term play financially:"These kinds of music streaming services tend not to breakeven for a long time. Growth is up to us so we tend to re-invest any money we make. We need to increase penetration so we have massive user potential".
Although financial success is over the horizon, it has made considerable progress in terms of roll-out. It is active in 10 countries including Kenya, Tanzania and Uganda and over the last 12-16 months, Nigeria, Ghana, Zambia, Zimbabwe, Mozambique, Rwanda and Cameroon. There are 2.5 million users across all territories: the largest countries are Kenya, Tanzania, Uganda, Nigeria and Ghana.
"When we have sufficient actives in a market, we put together a comprehensive music catalogue for that market. That's followed by an uptake in users. It has to be super, hyper localized. Internet users on smartphones want different types of music even within a country".
The platform has over 2 million international tracks and 200,000-300,000 local tracks from the continent and the latter are the ones that get the most use:"We've been in business for seven years because we've been able to grow and scale our catalogue at low cost".
The users split into two main segments: aged 18-24 and 25-34. The younger segment are more tech savvy but the older segment are more likely to get hooked and become regular users:"The 35+ users are relatively small in number and skewed to males. It's hard to do much about this age group".
He sees Mdundo as competing with pirate music streaming services:"That's the biggest driver of online music use". So how does Mdundo get people to come to the platform?:"It's not very, very difficult. The majority of people download from illegal platforms. There are no good alternatives in many countries so as soon as you put the catalogue on the platform, they come by themselves. They're saying now we can get a product that's appealing and interesting".
Mdundo is currently 100% focused on the on the free tier because the challenge of getting pay-for subscribers remains difficult. But Nielsen believes that things might change soon. "We're lagging behind quite a bit on paid. I'm now more optimistic about it than I have been for the last couple of years".
"It's very hard to get decent revenues from a subscription service with the revenue share telcos offer but it will change. Voice and SMS have high margins but these margins will go down with more data use and at that stage getting revenues from Mdundo will be interesting."
"30% of revenues should go to the mobile operators like the Google Play Store and the Apple Store. This is already the case in some markets but it's not just about revenues. The mobile operators need the competitive edge (music streaming gives them) as much as the revenues. They need to use things like music streaming to attract new customers and we'll see more and more of that. Jio took over the largest music streaming service in India and made it a free service".
He does not see himself competing with existing mobile operator streaming services:"There's no problem with telco offerings in any of any of the markets we're in. A lot of them now bundle things like Spotify. Running a music service is not the same as running a telco. The dynamics are very different. It's a lot more effective to work with us or someone like us".
A key part of Mdundo's success has been that its investors are committed to the company and understand what it's trying to do. They are individual business angels, the majority of whom are from Europe:"What keeps making the business case exciting is that there is a strong case for sustainability. There is a big trust (from the investors) in the way the market is moving".