Operator participation vital to African digital music industry

Digital Content

Mobile operators must participate if Africa’s digital music industry is to become a viable market by introducing attractive value propositions to customers, as the current model of the music industry is not working, according to panelists at the VAS Africa summit in Johannesburg.

Panelists considering distribution channels and revenues of the digital music industry in Africa agreed the value chain currently in play in the largely download-based market is not working, as it does not provide fair income to artists and does not incentivise consumers to pay for music.

“The value chain is very wrong,” said Yoel Kenan, chief executive officer (CEO) of Africori.

“If you think that a content owner will get 10 to 20 per cent of the cost of for example a ringtone, there’s no other industry in the world with rates like that,” he said. “The model doesn’t work, we know that.”

According to Gillian Ezra, chief operations officer (COO) of Simfy Africa, the future of digital music lies in streaming, with the panelists agreeing streaming holds the most potential.

“Streaming has flipped the model on its head,” she said. “Content owners are getting up to 60 per cent.”

However, Ezra said there is a fundamental lack of understanding of the streaming business model on the part of artists, operators and even regulators, which is hindering the market.

Marc Herson, CEO of 2go, said the problem lies in the fact there is a lack of willingness to find a way to monetise the industry, in order to benefit artists.

“The appetite for music is there,” Herson said, pointing to the millions of free downloads that take place.

“The appetite for making money from music is not there. The economics just don’t work.”

The panelists all agreed mobile operators have a key role to play in making the digital music market viable.

“A lot of it comes down to the operators and their willingness to properly support artists,” Herson said.

“Until such time as the operators come to the party and assist us – such as by dropping the ridiculous transaction fees – it will be difficult,” said Bradley Shaw, Spinlet consultant.

In particular, the panelists agreed affordable music bundles are pivotal to make money out of the digital music industry.

“We believe there will be US$4-5 billion for African recording artists within the next five years,” Kenan said.

“But people aren’t ready to pay for music streaming, you have to bundle it.”

From the operators’ perspective, all of the operators’ business units must be involved and motivated, not just the marketing team, Kenan said.

“It’s not about the technology of how to do streaming. It’s about the business model,” said Ezra, pointing to bundles as a key example of a possible model.

“It’s a completely different value proposition [to consumers],” she said.