Will Spotify succeed in Asia?

Spotify claims to have no specific plans to share at the moment and also could not disclose which markets it would be entering. However, Techcrunch has reported that Brody is recruiting in Australia, Hong Kong and Singapore – so inferences can be drawn from there.

“Asia’s consumers will welcome a premium service like Spotify with open arms – particularly in markets like Singapore and Hong Kong. There are few really good music services in the region and it’s a Greenfield opportunity for Spotify,” said Jasper Donat, co-founder of Branded and president of Music Matters.

An enthusiastic user of Spotify, Donat believes it represents the future of music consumption. However, others, like Universal Music Southeast Asia senior-vice president Sandy Monteiro aren’t quite as sure that Spotify will find Asia-Pacific an easy nut to crack.

While the region still lacks a single unified digital music service platform like Spotify, several markets have their own music services such as PCCW’s Moov in Hong Kong, SingTel’s Music Store in Singapore and Korea’s Soribada, pointed out Monteiro.

“In a sense, Spotify is entering the market at a great time – digital music demand is higher than ever and the market has the technology to support it. But on the other hand, their late entry has left room for each market to develop its own unique music service providers – many of which are backed by local telcos,” he said and added that he himself was keen to have Spotify in the market and was one of its biggest advocates.

Universal Music itself has been working to diversify its digital music services in Asia. “We’ve looked at creating revenue streams outside the available services and have worked out brand partnerships as well as direct services with key partners and brands. Examples would be DiGi’s music unlimited store in Asia and Singtel’s AMPed in Singapore, said Monteiro.

Caller ringback service partnerships Universal Music has with Southeast Asian telcos is also main revenue driver for the region.

In terms of revenue, last year was the best year Universal Music Southeast Asia has had in a decade, added Monteiro. “Right now our business is about 50% digital – demand is higher than ever before, so long as users find legalised services easier to use than pirated services,” added Monteiro.

The two main factors in making a legal service more attractive than pirated content, he continued, is legislation banning piracy and easy to use legalised services. “The Korean music industry’s growth can be directly linked to legislative action by its government and other Asian countries are starting to follow suit,” said Monteiro

Spotify will also have to understand and cater to local markets, said both Donat and Monteiro. Although Spotify carries tracks from Sony, EMI, Warner Music Group as well as Universal Music, in some markets like Indonesia where music consumption is largely local content, these international labels may not be able to supply sufficient content to grab the market.

“Local content will play a heavy part. But the service can use aggregators to supply them with independent label content,” said Donat who feels this would not necessarily be an obstacle to the service.

Cheuk Chiang, CEO of PHD Asia-Pacific, said brands and marketers would welcome a music service like spotify. “It allows brands to directly connect with a young audience via the love of music by sponsoring their music consumption. Spotify’s partnership with Facebook also allows social sharing and it’s a great platform for brands,” he noted.

“Spotify, and services like it, are answering the need for brands to have one-to-one personalised relationships with clients,” said Monteiro. However, he’s concerned with the slow speed at which Spotify is entering the market. “Rdio, the American rival to Spotify, will likely be in Asia ahead of Spotify,” he said. “Also the local telcos aren’t going to allow their dominance to be undermined.”

Another potential challenger to Spotify’s success in the market could be Apple’s iTunes store.  “Spotify’s announcement may accelerate iTunes’ entry into Asia. There have been rumous,” said Donat.

Whether Spotify in particular succeeds or not, 2012 will be the year for cloud based streaming services in Asia, he added.  “I expect we’ll be seeing services like iTunes, Rdio, MOG and Spotify all launching services in the region next year.