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Problems for Music Streaming Profitability in Asia

Limited income, piracy and mobile data plans are part of the issue

Although the popularity of streaming music has steadily increased in east Asia, making it profitable for streamed music service providers is a hard road. But why?

One obvious reason is a lack of disposable income among a high percentage of potential subscribers. Malaysia, Philippines, Thailand, and Indonesia total over 120 million households between them, yet the vast majority of those households have annual incomes of less than $25,000 p.a. There is substantially more private wealth in Singapore, Hong Kong, and Taiwan, but those nations only total 12.5 million households.

These income limitations have helped to fuel a reluctance to subscribe to music streaming services, which has meant an extremely low per capita monthly revenue from most east Asian focus markets. Between Singapore, Hong Kong, Thailand, Malaysia, Philippines, and Indonesia, there is an average revenue from monthly subscriptions of a mere $1.31 USD. (For contrast, that average is $13.70 in the US and $16.20 in the UK. Japan’s average is $6.4)

But there are other factors involved in this music streaming subscription reluctance. One of these is piracy, which is not easily stopped in many east Asian countries. “Free” online downloads, music bought on USB devices, and files converted from YouTube videos are so easy to acquire that many Asian consumers in the countries in question believe that music ought to be “dirt cheap”, which puts pricing pressure on legitimate subscription services.

Another obstacle to overcome for music streaming service providers is the cost of mobile data. A seemingly infinite music library accessed on-the-go is a major selling point for the service. In Philippines, Malaysia, Taiwan, and Indonesia, the cost of mobile data is quite high in proportion to disposable income. In Thailand the cost of mobile data is lower, but average annual incomes are quite low, too. So consumers here aren’t enthusiastic about paying for music which requires a Wi-Fi connection.

Related to the above is the quality of smartphones in the focus countries. Low-end smartphones are prevalent and may go for as little as $75 in some places. These phones are limited in memory capacity and slower in processing power. The high-quality streaming functionality that affluent customers demand isn’t there, meaning music streaming services won’t work well. Rather than create limited-functionality music streaming apps for these low-end phones, the market leaders in the region have simply decided not to concern themselves with interesting their owners.

Music content licensing costs streaming service providers huge money. Although modest cost-wise in comparison to physical music sales, the contracts for licensing from the music rights holders typically come with an up-front (and continually increasing) minimum payment guarantee with each renewed licensing period, regardless of how much music actually gets streamed. This arrangement screams to be revisited in the east Asian market context.

Finally, there are weak revenues coming in from advertising on music streaming platforms from the countries in question. Conceptualized as cost per 1,000 impressions (eCPM), this revenue comes to USD $9.68 in the US and $10.65 in the UK but only $5.77 in Singapore and $4.53 in Japan (two of the most affluent east Asian nations). Is there a blind spot here with Asian advertisers? It’s possible.

All things considered, a new streaming music business model is needed for the east Asian market if providers want to see a lot more profit.

Author: Buddy Iahn

Buddy Iahn founded The Music Universe when he decided to juxtapose his love of web design and music. As a lifelong drummer, he decided to take a hiatus from playing music to report it. The website began as a fun project in 2013 to one of the top independent news sites.

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