• Monday, December 04, 2023
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70% of Spotify’s revenue goes back to music rights holders – Gustav Gyllenhammar

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Gustav Gyllenhammar, Spotify’s VP, Markets and Subscriber Growth, was in Lagos, Nigeria in October for the first time. In this exclusive interview with BusinessDay’s Frank Eleanya, he speaks on the investments the company is making in Africa, and the push to expand the global appeal of Afrobeats and other music genres on the continent. Also, he discusses the Internet challenge consumers face streaming audio entertainment on the continent in light of long-term investments.

What are the key opportunities for Spotify in Africa?

I was happy when we finally got to launch in Africa just a few years ago, that is something we have been waiting for, for a while. We wanted to wait until the time was right. Spotify is a global platform and we are now present in 184 countries around the world. Our mission is to reach more than a billion consumers around the world. Ensure tens of millions of audio creators can earn a living from their art.

Read also: Spotify Afrobeats Lagos event ignite music, podcast passion

For us to achieve that, both from a consumer and creator scale, we need to be present in Africa. As you know, Africa has a billion+ people opportunity and it is the fastest-growing continent in the world. It has the youngest population and lots of growth. If you zoom in from Africa down to Nigeria, Nigeria is the largest and one of the most vibrant countries within sub-Saharan Africa. Everything pointed to the necessity of being present in Nigeria for us.

How are you investing in the African market?

You can see that from several angles. We can start talking about creators and I will get to consumers. Before we launched in Nigeria, we saw that music from Nigeria was growing rapidly on the platform around the world for several years. It probably started with the diaspora movement. There was a lot of consumption in the UK and Canada which are markets where we typically have large Nigerian communities. I think there was a pivotal point when a lot of the Afrobeats music was blowing up globally. Some of that was thanks to a lot of the collaboration we saw like Drake and Wizkid.

Suddenly Afrobeats music became not fully mainstream because I don’t think we are there yet, music consumers from around the world fell in love with the music. So if you look at what has happened over the last years, it has been growth and growth. Last year, music from Nigeria, the revenue number we have seen on our platform is N11 billion. It is a sizeable revenue that we drive back to the community. That is part of the investment. But since we came here locally we have built a team here in Sub-Saharan Africa, in South Africa, Nigeria and Kenya. We also investing both in marketing, and traditional marketing such as out of home, on TV and online. We are also putting in a lot of investment in how we work with creators and amplify that. You will see us do experiential activations together with music artists and podcast creators and amplify that in order to build something vibrant.

In light of the rapid change in genres in the music industry, what is Spotify’s long-term growth projection for Africa?

On the genres, there are always going to be new genres. We want to partner with creators whether from an established genre or the up-and-coming ones. We want to make sure that professionals and aspiring people in Nigeria and other countries can make a career out of the things they love the most, which is creating and producing music and podcasts.

For that to happen, we need to also focus on the revenue generation they can help bring to the platform. On the music side, 70 percent of our revenue goes directly to rights holders. The goal is for creators to be able to thrive and grow a stronger ecosystem for the industry.

Read also: Spotify rakes over N11 billion from Afrobeats artists

Africa may have over 1.5bn people but internet penetration is the least in the world. How do you plan to reach the lower market, given that your service is heavily dependent on internet availability?

We welcome the connectivity initiatives of the government and telcos as well as other players in the market. We are not in the business of laying down the infrastructure. That is not our business but we are happy to see that happening more rapidly. We see more consumers having smartphones in the sub-Saharan African market and the new developments from an Android perspective. I think there are more accessible phones for consumers across Africa. We still think that data cost is a barrier for a lot of consumers using mobile phones. It is a challenge we want to help overcome. We want to make sure that the amount of data streaming music consumes is frugal and doesn’t take up too much bandwidth, which is an advantage. A video service is much heavier.

We also have a long-term perspective looking at the process of being a participant in the market for many decades to come. We don’t want to be coming in and out and trying to make a quick buck. We want to build a sustainable business together with our partners in the market. We are also working with many telcos all across the continent on partnership initiatives on things such as zero ratings so that consumption of Spotify on mobile phones is not consuming data. We have had a partnership with Airtel in Nigeria since last year. We have also partnered with Orange and other big partners. So those are some of the initiatives we have to help the market.

What are the features that have contributed to the growth you are seeing in Africa?

What consumers and creators realise with Spotify is that we are very good at combining our global footprints and strength with strong local adaptations. From a product perspective, consumers in Nigeria and other SSA markets can really benefit from the investments that we make globally. We are a close to 10,000 employee company with the largest engineering resource. Personalisation is one of those resources, which is the discovery of music and tailoring that experience to each consumer’s need. That is something that we hear all the time from the consumers that we do better than anyone else. But then, we are also investing in things such as ubiquity, making sure that whatever hardware or software service on the platform that you are using as a consumer we want Spotify to be the best – from big tech companies to every kind of company that leverages all kinds of technologies to put Spotify into their product. I think the last global strategy that is important is our freemium business model, which means consumers can either choose to listen to the music for free and be supported by advertising or they can pay for a premium service. All those are the global elements. If you come to the local market, we have an expert editorial music team that create playlist and programs for each important market in the region so that there are curated playlists for each consumer. So whether you are into gospel, local hip-hop, afro-fusion or Afrobeats, there are phenomenal playlists that these expert music creators can create for you as a consumer.

Spotify created an Afrobeats blog. What is the goal of that project?

There are reasons we wanted to do that. We wanted to demonstrate to the world just how important Afrobeats is, not just in West Africa, but around the world. By bringing out more transparent statistics and describing the impact we are seeing Afrobeats have on the consumption of music around the world, we thought that would inspire not just local consumers or creators, but really open people’s eyes that Afrobeats is playing on the global stage. It is no longer a local thing in West Africa. We also help creators from the genre to have their music to be displayed on some of the placements we have around the world. We have a partnership with FC Barcelona, one of the main football clubs in the world.

We are also showcasing Afrobeats in places like Times Square in New York and the Main Station in Toronto. Those are two key examples we know there are large numbers of Nigerian diaspora population. Bringing Afrobeats to the world has been a very big passion for us, both for the teams that are here locally in Africa and also for our global music team to have realised the potential of the genre.

Read also: Calm Down billion streams a pivotal moment for Afrobeats — Spotify

What are the challenges in reaching the wider market?

We see that whenever we enter a new market the area it typically takes off is the area with the young population. It is not a surprise that we are overrated on our platform to Lagos from an audience perspective compared to the national population. We have also seen growth outside of Lagos in the last year. Typically, that happens with audiences like students in university towns before we get to the second and third urban. It is very similar to what we have seen in large economies. It happened when we entered Brazil for the first time. In the first couple of years, our audience was centred on São Paulo and Rio de Janeiro. But over time, we started growing in other parts of the country.