Can Spotify win the Indian audio streaming market?

Spotify‘s (NYSE: SPOT) mission is to support a million creators of its music platform and to have billions of people on the platform listening to them. To achieve these goals, the audio streaming giant will need to be successful and gain market share in the world’s largest markets. And given that it operates somewhat at a disadvantage in China due to the government’s preference for local internet companies, Spotify has focused a significant portion of its investment in the other country of over $ 1 billion alone. ‘inhabitants: India.

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By the numbers

Spotify entered the Indian market in February 2019 and since then it has made rapid gains there over its streaming audio rivals. According to App Annie, at the end of September 2020, Spotify had 42.1 million monthly active users (MAU) in India, ahead of its local competitor Gaana and just behind market leader JioSaavn. If it maintains this rate of growth, it should soon become India’s premier music service (if it hasn’t already).

In its last three earnings releases, Spotify has highlighted that its performance in the Indian market has exceeded management expectations. One way to track this growth – beyond reporting from third-party services like App Annie – is to focus on how Spotify’s “Rest of the World” segment is doing relative to the business as a whole. In Q1 2019, the “rest of the world” accounted for 13% of Spotify’s overall MAU, but in Q4 2020 it was 19%. Much of this growth can probably be attributed to India, showing that the company is attracting users there faster than it is in Europe and the Americas.

So we know that Spotify has won over consumers in India, but How? ‘Or’ What did he do that? Well, on the one hand, the company is pricing its services there to reflect both Indian consumer habits and download speeds. For example, it just announced that a version of its paid subscription service called “Premium Mini” will be available to Indian customers for around 100 rupees per month ($ 1.38). It also offers a lite version of its app called Spotify Lite which helps optimize the service for uneven networks in emerging markets.

Finally, Spotify invests in the local Podcast content to help improve the value proposition of its free service. With Indian subscribers paying a fraction of what those in Western markets do for the service, it will be necessary for the company to do more to monetize this market through advertising. Podcasts should be a big part of this push.

India’s streaming potential

Why is India so crucial for Spotify? Well, the country is expected to have a population of nearly 1.5 billion by 2025, and streaming is already the preferred choice of music listeners with a 73% share of the recording industry’s revenue. The use of smartphones is also booming in the country. In 2017, only 23% of India’s population used a smartphone – by 2022, 36% are expected to have one.

These numbers highlight the scale of Spotify’s opportunities in India. The service is pulling a giant tailwind from the growth of music streaming and smartphone penetration in the country. If it manages to maintain its growth in the face of competition, the service could reach 150 million or even 250 million MAU over the next decade, while Spotify could already approach market saturation in Europe and North America. And with a leading position in the Indian audio streaming market, the service will reach the goal of managing one billion users sooner than many investors realize.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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