A research project carried out by Informa Telecoms & Media, publisher of Music & Copyright, and the streaming music service Spotify has concluded that large mobile operators could add millions of euros to their bottom line by partnering with a music streaming service.
Rapid smartphone uptake combined with the recent rise of streaming services like Spotify have for the first time enabled music to make a substantial impact on operator’s market share, ARPU and churn. By partnering exclusively with an existing player rather than building their own service, fast-moving operators can realise these gains quickly while shutting out competitors.
The study is based on real data from the Swedish telecoms operator Telia and Spotify, as well as research from Informa Telecoms & Media and other service providers and operators. Using this data, the study estimates that an operator in Western Europe with 20 million customers could generate revenues of €77.7 million in 2011 alone from partnering with a streaming service. If the leading player in each Western European market did so, they would collectively generate €1.1 billion in 2011, the study found.
One of the authors of the study, Giles Cottle, said that the research shows how a large Western European operator could “generate millions of euros of revenue a year by partnering with a third-party music service – significantly more than they would gain from offering their own service. Add in other benefits, such as network efficiency, brand awareness and increased lifetime customer value, and the potential for such a partnership becomes very clear.”
Adrian Blair, Director of European Business Development at Spotify, added “music download stores which operators launched prolifically over the last 5 years are commodities and had little impact on core business metrics. Streaming services, by contrast, have proved an effective way to differentiate from the competition and win new customers. They have also been used to upsell high-ARPU devices and reduce churn. Over half of Spotify/Telia customers said they were more likely to stick with Telia as a result of the Spotify partnership.”
The study says that Telia’s experience has helped illustrate best practice to other operators wishing to emulate their success. Churn reductions and potential gains in market share and ARPU resulting from mobile music streaming will not materialize without a clear strategy and focused execution. A high-quality streaming product and the right offer (for both operator and consumer) needs to be combined with effective marketing, a motivated sales force and deep billing integration. Simply offering a popular free service, with little thought put into the way the offer is packaged and marketed, will not yield the kind of results the operator will be hoping for. Yet if they get it right, the rewards are potentially lucrative.
The joint research paper is available on October 20th exclusively through the Informa Telecoms & Media Analyst Community Group on LinkedIn (www.informatm.com/linkedin).
Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.
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