Arrival of mobile music downloads heralds the beginning of a real services sector in Africa

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With the arrival of cheap international fibre and the roll-out of national networks, there has been much talk (some of which we’ve been responsible for) of how a services and applications sector will emerge. Until now most of this has been more in the promise than the delivery. But now there is a music downloads service provider that both sells significant volumes of music across the continent and delivers income to artists. Russell Southwood talked to Ken Njoroge, CEO of Cellulant.

Cellulant started out as an SMS aggregator delivering texts for clients and servicing them for mobile operators. Now it has begun to develop into a mobile services enabler, focusing on commerce and content. Ken Njoroge of Kenya’s Cellulant wants to be “big on mobile music and mobile money”

Q: How did Cellulant get into the mobile music business?

A: We kicked off services in 2004. At the time it was a ring tone service because of the limitations of the handsets on the network. We thought the market was likely to be driven by a younger audiences. Actually, the audience was rural/peri urban and it was consuming local, vernacular music. The average age of our consumer was in the early to mid 30s. Now 90% of our downloads are for local content.

It was a younger audience in developed markets and downloading a ringtone was about how you presented yourself. Here it was much more fundamental as it addressed the poor distribution channels that exist for music.

Q: What were the existing music distribution channels at this point?

A: Well, nothing has significantly changed since 2004 so it’s the same now as it was then. If you want to find high-quality recordings, there are only 3-4 outlets in the whole country (Kenya) and all of these are in Nairobi and all are on River Road (also the home of Riverwood, Kenya’s own Nollywood). It’s the hub for local music.

For less high quality recordings, there are the pirate copy stalls and it’s undoubtedly true that these have made a huge dent in the local music industry. But the pirate distribution has been a double-edged sword. It denies artists the proceeds of their work but it’s also a significant indicator of demand. It indicates that you need to develop an audience at the right price point.

Q: So how many monthly music downloads are you dealing with?

A: It fluctuates depending on marketing activity but in a typical good month we get somewhere between 300,000-400,000. A successful artist might have 200,000-300,000 downloads over 3 months. With ringtones, it was all being sold to those with low-end handsets. Now we estimate that 20-30% of the total market has media capable handsets. So as the handsets get more sophisticated and with mobile Internet coming on-stream, you get multimedia Internet consumers. They can download MP3s and these sound good on their phones. Customers now buy full tracks rather than ringtones and it becomes a mainstream music distribution channel.

Q: How do consumers find out about what music’s for sale?

A: We run a mobile portal for music and it has material from about 800 artists. I was looking at a music report the other day and it was talking of there being 50,000 artists who’ve recorded in Kenya. To ramp up sales, we need a business model that takes us closer to “the long tail”.

We need to open up content distribution tools to artists. An artist should be able to download our contract, sign it and send it back and upload tracks into our storefront. We’re going to be launching a highly personalised experience also for the user. If you like music from a specific region, you will get a tailored response that reflects your choices.

Q: What’s the total number of buyers?

A: There are about 7 million buyers across Kenya, Tanzania, Nigeria, Ghana, Zambia, Botswana and Malawi, the countries we operate in. The big markets for us are Kenya and Nigeria and these are the markets we’ve been in longest. We understand these markets.

Q: What’s the cost of downloading a track?

A: In Kenya it ranges from KS50-70 (US64-89 cents) and in Nigeria it’s about the same at around N100 a track (US66 cents).

Q: Who gets what out of that?

A: First, the Government takes 26% in taxes. After that, the operator generally takes 50-60% and we pay 10-12% to the artist in royalties. Prices across the countries we operate in are broadly similar.

Q: You’ve had a legal run-in with one of the Collecting Societies in Kenya. How’s that going?

A: There are a couple of Collecting Societies in Kenya and one we are in conflict with (Music Copyright Society of Kenya). The issue is still in Court. But we are coming from the view that the music industry should remain open. Music copyright owners should be free to get into any agreement with their works. Collecting Societies want to be a “one-stop-shop” and handle everything for the copyright owners.

There’s always a little fighting before the industry gets into some kind of structure. Collecting Societies need to make it easier for us to do business. We need to be able to cut a single cheque to them for many artists. The industry is young and has lots of historical issues. The Collecting Societies have a quasi-governmental structure.

We needed to get into the business and sign up artists ourselves and it makes sense to work directly with artists. People who but the music are interested in the stories behind the artists and want to buy wallpaper associated with them. Therefore we need to develop a user-generated model where artists can see what people want and they can view their own sales stats without going to the Collecting Society. At present, we’re sitting in the middle.

Q: What are you doing in terms of mobile commerce?

A: We’re providing mobile payment platforms for the banking sector. These provide mini-statements, allow you to check your balance and pull cheque books. You can move money from your bank accounts into MPesa and other mobile wallets. We’re doing this for 34 banks across the continent.