When France-based music streaming service Deezer, launched in the Middle East in 2018, followed swiftly by Sweden’s Spotify, it appeared that the region’s music industry was ready to move beyond the plague of piracy.
Deezer managed to secure $266.7 million from Saudi’s Prince Al Waleed Bin Talal’s Kingdom Holding last year and gained exclusive access to the catalogue of the Middle East’s largest record label, Rotana Music. The company claims to have registered four million app downloads since its launch in the region and engagement rates on par with global levels. It is now partnering with telecoms operators in the region to enable direct-billing to overcome the lack of credit card penetration in the Middle East and is considering an initial public offering (IPO) over the next year or so, depending on market conditions.
We interviewed Hans-Holger Albrecht, the global chief executive officer (CEO) of Deezer.
How does the Middle East region differ compared to others?
We have over four million [people] downloading the app, people spend up to 38-40 minutes per day with us and in principle, they behave the same. But the Mena region situation for us is different. Rotana is very strong here and has a great history and promotes local artists. They saw the opportunity with Kingdom Holding with Deezer and they gave us exclusive rights. This is the only region in the world where that makes sense. It’s 10 years, a very long partnership.
We focus a lot on local music, we have 56 million tracks in our local catalogue, we engage very strongly with local artists and work hard to find new ones. The beauty of the success of music streaming is that users can get all the music on one platform.
Are you developing your own content?
This is planned to come, we’ve done it in other markets with podcasts and audiobooks. In Brazil we launched this a year ago and now 10 per cent of usage is podcasts, in Germany, audiobooks is 14 per cent of usage. People like them. We have Deezer Originals where we produce our own podcasts, our own shows and we want to do the same here. We don’t find new artists, the consumer finds them. We know when people come to the platform they look for the very famous singers first and the second is very niche artists. When they find both, they stay and start to engage and hence it is important to have both types.
How important is artificial intelligence (AI) to your business?
The fundamental problem with music streaming is every human-being has their own taste and you have to serve that taste. We work a lot with AI. We collect 45 million data points every day. More than 50 per cent of the time, listeners say “Deezer entertain me”, and choose the flow button or mixes. They want to be entertained but want a personal experience and you can only do that with data and very good algorithms. You need to invest so much in data and data analytics, it is the base of the business, however, we still see that human creation is very powerful so we have 40 editors who curate content.
How do you tackle piracy?
The experience of the whole industry we operate, is built on the ruins of piracy, look at Netflix or Lime, or Pirate Bay. You can see that Sweden had the highest piracy rate and now it has the highest penetration of paid streaming music at over 40 per cent. You won’t completely get rid of piracy, you can make it difficult for the listener to find [pirated content]. What we can see is people need to feel the value, it’s a safe and secure system we operate in. You can listen to Deezer for free and eventually we convince them that if you want to have more features like downloads, you pay.
The reason why we built the business by partnering up with telecoms companies is they can do the billing for you. They can bundle it into the phone plan. That works very well and is a good supplement to credit cards.
YouTube is the most popular platform for music in this part of the world, how do you compete?
The competition with YouTube is different. YouTube just rolls out videos, we try to create an experience. They have it for free and they pay almost nothing to the artists. Which is a very weird and tough and unfair model. In the US, they’ve debated it can’t go on like this. If you look at the Taylor Swift situation, it was ridiculous, she was blaming us platforms, but she throws everything for free on YouTube. There is more and more of a sense can’t go on like this.
Are you considering any acquisitions?
Consolidation is around, there will be a lot of movement in the industry. It’s a scale business and if you don’t do it on a global basis, it’s tough.