The most established music streaming service, Pandora, has around 80-million users. Swedish music streaming service Spotify, which is more similar in its model to Cologne, Germany-based Simfy, had 15-million users as of last month. These figures speak of the growing appetite internationally for music streaming, whereby you “rent” music, rather than purchasing individual songs. Now a German-South African partnership is taking a punt on the idea that South Africa, too, is ready for such a service.
Simfy (pronounced “Sim-figh”), a music streaming service available in Germany, Belgium, Austria and Switzerland, has just partnered with South Africa’s eXactmobile, the mobile content company owned by Primedia, to create Simfy Africa. CEO Davin Mole explained to the Daily Maverick that eXactmobile began working on a music streaming service in the first quarter of 2011, with Simfy brought on board in October last year.
“We are the first legal streaming music-on-demand service available in South Africa,” Mole said. “Apart from a few of the cellular networks who have experimented with similar services in the rest of the continent, we are the first in Africa too.”
The service is available via laptops, desktops and mobile devices – applications for Android, BlackBerry and iOS are currently available, with apps for Nokia and iPad to follow. Its functionality is very simple: once you’ve signed up for the service, you can search for tracks, artists and albums, create playlists and play them. It has a database of almost 20-million songs across a range of genres, which Mole said is increasing daily – users can also submit requests for songs to be added to the catalogue.
Trialling their service, the music library seemed impressive, although some reviews have suggested that the more recent albums of artists are more likely to be available than older ones, and those with musical tastes tending towards the obscure are likely to be disappointed. Local music only amounts to around 5% of the songs on Simfy’s database, but Mole said these songs have been getting disproportionally high listenership so far – between 30% and 40% of the total. As such, the service is scrambling to increase its local content.
As The Times’ Toby Shapshak pointed out, “Spotify is the gold standard in streaming”, and Simfy certainly stacks up well in comparison, particularly in ease of use. Where the two services differ, however, is in revenue streams and subscription tiers. Spotify has a three-tiered system, with the lowest (free) tier offering a limited number of listening hours each month, supported by radio-style advertising. The two paid subscription tiers do away with advertising and listening limits, and the top tier – Premium – offers features like the ability to access music offline.
Simfy, on the other hand, has no free tier (although it offers a 14-day free trial period) and consequently no advertising. “We considered the advertising model, but we were put off by the fact that the online ad market is still underdeveloped in South Africa, so it seemed like financially it was going to be a non-starter,” explained Mole. An advertising model was also rejected because of practical and licensing difficulties with playing adverts on mobiles, which Simfy was adamant should be a platform for their service.
How it works, then, is that you pay a flat rate of R60 per month, renewable each month. For that fee, you get many of the features Spotify offers via its “Premium” tier – most significantly, the ability to download music and listen to it offline. This doesn’t mean you “own” the song – you can only listen to it via the Simfy player, and you can’t transfer it to anyone else – but you can listen to it offline for as long as you have an active subscription.
“What we’re seeing so far is that a lot of people are making use of fixed Internet connections at home and in the office to load up their laptops with music and then listen offline,” said Mole. “We have one user who has already downloaded 2,000 songs, which for R60 is pretty good value.” Of course, he’ll have to keep paying his R60 monthly to keep listening to those songs – this isn’t a way to build up a permanent music library.
Another way in which Simfy has been tailored for a local market is in its payment options. In Europe and North America these services can generally only be paid for by credit or debit card, while South Africans can pay their subscription fee through cell phone accounts. In a mobile-driven market, this option will likely be popular.
Simfy is probably best suited to those with uncapped broadband connections, potentially an issue for those with capped access. Streaming music on Simfy will eat up around 85 megabytes an hour, which adds up if you’re likely to be listening to a number of hours per week on a capped account.
“We have been investigating the price of Internet for some time, and it’s still not the best it could be – it’s still quite expensive. But the way the prices are tumbling encouraged us,” Mole explained. “We think you have to shoot a bit ahead of the clay pigeon. So hopefully by the time we’ve got our marketing totally up to speed, and ironed out any glitches, those prices will have come down further.”
In some ways, it’s an interesting time to be launching a service of this kind. A recent hoo-ha over Internet radio listener figures revealed the market is still at best embryonic in South Africa. Of course, Simfy isn’t an Internet radio station, but some of the factors constraining the growth of that sector might well apply. “We aren’t put off by the low levels of Internet radio listenership,” insisted Mole. “We’re only two weeks in, and by the end of the month we estimate that we’ll have served up 1.5-million songs without much of a media campaign yet.”
From the other side of the coin, 2oceansvibe Radio CEO Seth Rotherham told the Daily Maverick his firm isn’t threatened by Simfy’s launch.
“When 2oceansvibe started some two years back we predicted that the Internet would be the new platform for music and radio engagement, and Simfy in that respect proves our concept further,” he said. “It’s gratifying to see that streaming services such as these are finally reaching SA. We don’t see this as competition but further proof that SA listeners are craving something different to what the current commercial space is offering.”
However successful Simfy turns out to be, it’s not clear how much artists will benefit from revenues generated by the service. While streaming music services do pay fees to artists and labels, some argue that these are insufficient. Spotify has come under fire for this issue, with Bloomberg reporting in January that artists like Adele, Coldplay and Tom Waits have opted not to make their latest albums available on Spotify because of concerns that the service discourages consumers from purchasing music, resulting in revenue loss for artists.
Streaming music services argue in response, however, they provide a superior alternative to piracy, where artists see no money at all. Mole admitted that “initial payouts to artists from streaming aren’t that high”, but added that “artists have to be patient. In longer terms, it’s dependent on scale. If we don’t get a huge base, revenues won’t add up.” He pointed out that services like Simfy can also amount to good promotional tools for artists, who make the majority of their income these days through touring and merchandise.
In the short term, Simfy is focusing on growing its domestic user base and “tying up some high-profile B2B deals”, Mole said. In the long term, it wants to look at expanding into different African territories. It’s ambitious stuff, especially as other streaming music services have found that expansion obviously comes with additional costs. Pandora – which admittedly gains most revenue through advertising rather than subscriptions – has in some ways been a victim of its own success. The company reported an accumulated deficit of $101.4 million in January 2012, warning investors in April that: “A key element of our strategy is to increase the number of listeners and listener hours to increase our market penetration. However, as our number of listener hours increases, the royalties we pay for content acquisition also increase.”
Spotify, meanwhile, reported a loss of around $59 million on revenues of just over $250 million in 2011. CEO Daniel Ek said in April: “The question of when we’ll be profitable actually feels irrelevant. Our focus is all on growth…But of course we expect to make a profit in the long run.”
Simfy’s flat subscription model may help it avoid some of the other services’ financial pitfalls. But possibly the most crucial difference between the South African market and those of other countries, as Tech Central pointed out, is that a local iTunes music store is not yet available, so music-hungry South Africans may fall on Simfy’s extensive catalogue with glee. Whatever happens, it’s certainly an exciting development in South Africa’s expanding digital realm. DM
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