A flurry of recent activity from leading on-demand music services in Europe and North America has seen companies such as Spotify, Deezer and MOG sign new partnerships with mobile network operators and multi-play providers and expand into new territories. This activity from on-demand music providers comes at a time of increased competition in the online and mobile music business with the launch of Google Music and Apple's iTunes Match service (to be discussed in a separate update).
Spotify launched its first services in Belgium, Switzerland and Austria in November 2011, following the launch of services in Denmark in October. This brings the total number countries served by Spotify up to 12.
Spotify also unveiled details of its partnership with UK multi-play operator Virgin Media (first announced mid-2011). New higher tier Virgin broadband customers gain six months free access to Spotify Premium (unlimited, on-demand mobile and online music), existing customers get access when renewing contracts. Virgin Media customers who sign up to a Virgin Mobile phone deal will get three months' free access with no additional data charges. A dedicated service for Virgin's top-tier TiVo pay TV customers is also planned.
Spotify has also extended its partnership with Telia in Sweden. Launched two years ago, Telia will continue to provide its mobile, TV and broadband customers with access to Spotify Premium.
Deezer - the France-based on-demand music provider signed an exclusive deal with Belgian telco Belgacom to offer bundled access as part of a number of its internet and mobile packages. Full details of how Belgacom will integrate Spotify services have yet to be announced.
MOG - the US on-demand music provider has partnered US mobile network operator AT&T in a move that will see its application pre-loaded on all AT&T LTE phones, though there is no agreement to offer bundled or subsidised access.
Rdio - the US on-demand music provider launched a service in Brazil in partnership with mobile network operator Oi. Rdio has plans for further international expansion, with launches in Germany and Australia expected in 2012.
Analysis
The extension of Spotify's deal with Telia Sonera illustrates the importance of bundled offers for premium online and mobile on-demand music services to reach a wide audience. Telia claims that 25 per cent of Swedish Spotify Premium customers access via its bundled offers (a number it expects to increase) and that one in five of its smartphone users have a Spotify subscription.
The partnership with Virgin Media will likely improve take-up of Spotify's premium offers in a market which has seen few bundled Spotify offers (outside an early deal with the mobile network operator 3). However, IHS Screen Digest does not believe that the effective six-month free trial is the most compelling offer and is one that is likely to see significant churn once the promotional period ends. Telia's offer of continuous access is one that is likely to see greater consumer demand.
Spotify's main European competitor Deezer has been among the most successful on-demand services when it comes to providing bundled services. IHS Screen Digest understands that more than 1.3m of Deezer's 1.4m total premium customers (as of October 2011) have signed as part of bundled deals from France Telecom - Orange (which holds a 14 per cent stake in Deezer). In Q3 2011, Deezer launched in the UK with a similar bundled deal with France Telecom subsidiary Orange, part of its Everything Everywhere UK joint venture with Deutsche Telekom.
The Belgacom partnership fits Deezer's strategy of partnering network operators as it launches in new countries. Although, it is somewhat surprising that it chose to partner Belgacom rather than France Telecom subsidiary Mobistar. Belgacom's Proximus mobile network held a slight lead in Q2 2011, with 39 per cent market share compared to second-placed Mobistar's 31 per cent.
MOG's deal with AT&T follows a similar partnership with Verizon agreed in January 2011. Preloading MOG's application on AT&T 4G smartphones will help boost awareness of the service as it faces greater competition following Spotify's US launch. But simply pre-loading the application may not be enough to drive mass adoption of MOG's service, though it will help it capture a bigger share of the audience willing to pay for on-demand music.
IHS Screen Digest believes that the best chance of success for premium streaming services is when the cost is effectively hidden from the user by being bundled with other services (e.g. broadband, mobile, pay TV).
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