Music Industry Insights Report

Content
Report SummaryIntroductionTopicsTrend AnalysisStatisticsKey TopicsKey TakeawaysConclusion

Report Summary

Nigeria’s media and entertainment industry stands to be its greatest export. With a projected annual growth rate of 8.6%, it is one of the fastest growing creative industries in the world. Analysts point to Nigeria’s population relative to the current market size, and the steady rise in internet access in making these assessments. But, even to the non-expert eye, the global prominence of music artists like Wizkid, Tiwa Savage, Burna Boy, Tems and others, nods at remarkable power within the industry. 


Despite this, much of the music industry’s revenue potential, particularly from recorded music remains untapped. Importantly, music streaming, which accounts for more than half the revenue of the global music industry, shows comparatively low penetration rates in Nigeria. 


This is not for want of trying. Multiple companies have staked their bets on the market with varying degrees of success. Spotify, the global leader in music streaming announced last month that it too will move into the Nigerian market as part of a broader global expansion. 


Spotify’s entry provides an opportunity to consider broad patterns in Nigeria’s music market, and clarify prospective revenue streams. We undertake a close analysis of the implications of mobile internet rates and population size for the Nigerian streaming market. Using our Versus Ask feature, we’ve collated data to tackle three sets of questions - Nigerians' listening habits (i.e. how often they listen to music, and from what sources); their willingness to pay for streaming services, and their awareness of Spotify and its services. We also analyse the potential for growth from recent international collaborations in the industry.


Disclaimer: Please note as you proceed to read this report. This report leverages our proprietary “Listen and Ask Methodology” (click links to read more on our methodology and how we apply it in reporting) to track the African consumer markets.

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Introduction

“The new oil.” That’s how Nigeria’s Minister for Information and Culture Lai Mohammed once described the country’s media and entertainment industry. Mohammed was speaking to a trend that numerous analysts have affirmed in recent years -- Nigeria’s entertainment industry is one of the fastest growing entertainment industries on the globe. The industry was worth $3.6 billion in 2016, and is projected to be worth $6.4 billion by 2021. This growth potential is credited to a myriad of factors including the size and relative youth of Nigeria’s population and the steady rise in mobile internet access. 


The music industry in particular shows signs of major gains -- the clearest being the rise to global prominence of multiple artists including Tiwa Savage, Wizkid, Tems, and Burna Boy. Nigerian Afrobeat artists, Burna Boy and WizKid won Grammy awards at the recently concluded awards show on March 14th, 2021 -- further cementing the massive impact the genre has had globally.


Unfortunately, like numerous other industries, the growth of Nigerian music has somewhat slowed due to pandemic-related restrictions. Live performances, the industry’s core revenue stream, have all but halted as Nigeria, like the rest of the world, works to wrangle COVID-19’s spread. Which is to say, times are challenging. But they also offer opportunities to deliver alternate value to fans and expand revenue streams for the industry. Streaming services, in particular, appear poised for the moment. 


While global trends that have seen streaming emerge as music’s largest revenue source in the last four years, Nigeria has consistently seen low uptake of streaming. This is not for want of trying. Industry players recognize that the market is rife for streaming - Nigeria’s population is large and relatively young, and the country continues to record steady improvements in mobile internet infrastructure. A few companies including UduX, and Boomplay have offered streaming services but they have yet to develop a robust paying consumer base for streaming. Some insiders also point to existing practices in the industry including a tendency for new artists to make their music freely available to gain traction and an unwillingness to pay for music (sometimes tied to an inability to do so). 


Amid these realities, Spotify, the global leader in music streaming announced last month that it will begin offering its services in Nigeria as part of a broader global expansion. If the company, and others on the market are to gain a foothold in any section of the market, they’ll need to engage with present consumer attitudes, and design offerings that are responsive to Nigerian realities.

Topics

Impact News/Posts – online news, news forums, and blogs, pertinent news articles or posts with associated sentiments (based on impact/rankings) on the Music and Streaming Services

  • Music Industry Collaborations
  • Music Distribution in Africa
  • Music Streaming Services
  • Spotify in Africa
  • Adoption of Streaming Services  

Sources used by Versus:

Covering social media (Twitter) from Nigeria


Music Keyword Trends


Statistics

Snapshot Overview

Twitter breakdown with a sample of approximately 4000 tweets from Nigeria. Dates from February 5th, 2021 to March 3rd, 2021.


Total Number of Tweets reviewed from Nigeria:

4,246

Using the following hashtags:

3,114 #SpotifyNigeria

1,132 #AfroPop

The sentiment distribution for this keyword on Twitter trended mostly Positive (see “Key Pointers and Observations”).

The sentiment distribution for this keyword on Twitter trended mostly Positive (see “Key Pointers and Observations”)


Key Topics

Music Industry Collaborations

The Nigerian music industry has seen a number of collaborations and partnerships with international record labels and streaming services over the last couple of years. For instance, Chocolate City Entertainment, founded by Audu Maikori, signed a partnership with Warner music group in March 2019. The partnership was initially structured to foster relationships between African artists and the global community by incorporating their music into the Warner Music Group repertoire. In addition, Warner Music Group signed a deal with Boomplay to locally distribute their music. 


The Warner Music licensing deal with the free music platform Audiomack targeted at key African territories (Nigeria, Ghana, Kenya, South Africa and Tanzania), worked towards providing support for Warner Music's A&R research activities across these territories, a great feat towards improving and empowering local artists in the region. The platform is completely free to independent artists with the ability to upload an unlimited amount of music.


Apple Music in their bid to support local artists, also launched a program ”Africa Rising” aimed at discovering and projecting African music talents, by amplifying the music of an artist from the continent to its users across all 167 countries of operation.


Universal Music Group Nigeria, the West African arm of Universal Music Group Recordings was established in 2017 following a deal with Afrobeats artists, Tekno and Mr Eazi. Universal Music Group Nigeria signed partnerships with Boomplay and Udux in 2018 and 2019 respectively.


Following a deal with Afrobeats juggernaut artist, Davido in 2016, Sony Music Entertainment announced expansion to West Africa with more physical presence in Lagos, Nigeria. The label had signed the likes of artists such as YCee and T-classic. However, the expansion had been criticized across the music industry following the poor performance of Davido’s EP “Son of Mercy” and YCee’s contract termination after posting tweets targeted at the former General Manager at Sony Music West Africa.


Music Distribution in Africa

Music distribution, the foundation for strong recorded music sales, tends to present challenges for many African artists. Some of the challenges that artists have to face include piracy and free shares or downloads via popular blogs. In 2020, one of the leading music distribution companies in Sub-Saharan Africa, Africori, signed a deal with Warner Music Group to support their expansion activities across Africa. 


TuneCore, a leading music distribution company for independent artists, launched operations in East and West Africa. The expansion was driven by documented growth with many African artists who are independently distributing their music across various platforms, and other Do-It-Yourself alternatives. 


emPawa - owned by Nigerian artist Mr Eazi - is a music initiative for music production and distribution of new artists across the world. emPawa launched the Africa Music Fund and raised $20 million in 2020. The investment, led by 88mph, seeks to combine technology and data to enhance music distribution for new artists under Africa Music Fund.


The challenges which are largely driven by the buying culture of Africans, quality access to internet services, and seamless payment methods are taking a good shape with partnership by these distribution companies and leading streaming platforms. The distribution companies will help and educate African artists about contracts and licenses to avoid granting blogs and authorized channels the access to distribute their works.


Illegal streaming sites and peer-to-peer file sharing are equally some of the challenges faced by music distribution in Africa. However, the growth of digital music distribution is heavily reliant on collaboration with Telecom operators due to the rising cost of data. This was one of the reasons why African Telecoms giant, MTN, acquired Simfy Africa (now called MusicTimes) in 2018. Safaricom similarly launched the Songa application which lowered the daily subscription fee from KSH25 ($0.24) to KSH5 ($0.05).


Music Streaming Services

Boomplay, a music streaming service that is pre-installed on all Transsion phones (Infinix and Tecno), reported 44 million active users in 2019. Apple Music reported 60 million paying subscribers globally in 2019 (compared to the 1.2 billion smartphones sold), and Spotify has 100 million premium users globally.


These platforms have gained a strong market share in Nigeria since their expansion into the African market within the last couple of years.

 

Below are the major music streaming services used in Nigeria along with their prices:

Sources: Techabal & TidBits


75% of the streaming services listed above either offer only paid services (i.e. no free option), or operate a freemium subscription model, where certain services are free, but users have to pay a premium to access the total package. 


UduX describes itself as the first African-owned music streaming platform to sign major music rights holders to its services. It currently offers Nigerian subscribers discounted bundles to view and stream music via a partnership with MTN.


Despite its prominence, Spotify was notoriously unprofitable for the first 12 years of its operations. Reports were published that it took the company 13 years and 96 million paying subscribers to turn a profit. Analysts note that this is because operating in the music streaming business can be pricey. Even before paying staff and covering other operational expenses, they have to pay licensing fees, which can cost upwards of $100,000 to music labels. This highlights the pricing challenge for music streaming platforms needing to find the ideal equilibrium to satisfy both artists on the receiving end and the listening end-users.

Music Streaming Survey

Using our Versus Ask feature we surveyed 2,500 respondents (Versus Scouts) in Nigeria on the topic of music streaming. Respondents aged 16-65 answered questions about their experience with music streaming, their preferred platform, and criteria for choosing the same. Their use of music streaming services, how much they currently pay, and for those that do not use the service, why they do not pay.

Of the respondents, 55.4% said they currently listen to music via MP3, while 26.7% make use of music streaming services.

30.1% of the respondents spend over 3 hours of their day listening to music.


Given the option, 47.3% are likely to engage a music streaming service, and 26.3% are extremely likely.


58.4% of the respondents said that their criteria for selecting a music streaming platform was either Subscription fee, or Variety in artist and genre selection.


77.1% of respondents said that they make use of music streaming services.


45.4% said that they do not pay for music streaming services.


For the reason why they do not pay for music streaming services, 37.9% said that they use the free option on the service that they use, while 26.7% prefer to preserve their data for other purposes. 11.5% however said it's too expensive and 7.7% make use of the subscription access of family and friends


On the minimum monthly spend on music streaming services, 15% said that they spend between N200 - N300, while 4.1% spend between N801 - N900


Spotify in Africa

In late February, Spotify announced that it would launch in over 39 new African countries. The company first entered the continent via South Africa in 2018.


Of the over 39 African countries that were announced for the 2021 expansion, Nigeria stands out as a market to watch considering its internet adoption rates and existing music streaming subscriber base.


Survey: Spotify in Nigeria

Using our Versus Ask feature, we surveyed 1,000 respondents (Versus Scouts) in Nigeria on the topic of Spotify coming into Nigeria. Respondents aged 16-65 answered questions about their knowledge on the development, and what they would prefer regarding pricing.

64.45% of the respondents confirmed knowing that Spotify is coming to Nigeria


The current minimum monthly subscription price was agreed to be fair by 60.9% of respondents, while 14.1% said it should be lower.


At a premium of N900, 48.4% are willing to pay for it, while 33.1% think it's too expensive


26.3% of the respondents chose Audiomack as their primary music platform which offers a free option, while  23.3% of the respondents chose Boomplay. 


53.4% of the total respondents said they prefer their current streaming services over Spotify, while 34.2% of respondents are likely to switch over to Spotify.



Adoption of Streaming Services

In parts of Africa, due mainly to lack of reliable infrastructure and poor industry governance, mobile data tends to be costly. For one gigabyte of mobile data, mobile networks in Nigeria on average charge $1.39 and Ghana charges $0.94, while Kenya charges $1.05, and South Africa charges $4.30. In other countries like Chad and Benin Republic, networks charge more than $20 per gigabyte of data.


People in countries with a significantly high cost of data such as Malawi (at $27.41 per gigabyte) and Zimbabwe (at $75.20 per gigabyte) will likely be reluctant to spend their data on streaming services. This will in turn affect music artists’ streaming numbers in these countries.


As of December 2020, 97% of the Nigerian population were reported active Internet users, where 74% of web traffic were generated via smartphones. These numbers position Nigeria as an enormous market for content streaming.

                                                                                                              Cost of 1 gigabyte of data (US $)


Survey: Adoption of Streaming Services

Using our Versus Ask feature, we surveyed 1,000 respondents (Versus Scouts) in Nigeria  on the topic of Streaming Services. Respondents aged 16-65 answered questions about their preference for streaming services and pricing.

66.2% of the respondents said that they will be willing to pay a minimal fee if they got all that they liked, while 11.6% are not willing to pay a minimal fee.


46.2% of the respondents do not care if royalties go to the content authors, while 23.0% care who receives royalties.


21.8% of the respondents chose streaming Audiobooks as the next most preferred content aside music, while 17.4% chose podcasts


Key Takeaways & Additional Nuggets

The sentiment distribution for the #SpotifyNigeria trended mostly positive, as people expressed their excitement toward the expansion of Spotify into Nigeria, and all the features that are offered. Subscribers who currently use VPN to access the platform in the country are excited following the announcement as they now pay a cheaper subscription. Also, users who were downloading MP3 music now see it as a game changer to save them storage to easily search and stream all their favorite music.

The sentiment distribution for the #AfroPop keyword on Twitter trended mostly positive because most of the tweets were about artists' new releases. Some of the tweets were announcements of music that made it to the "African Hits" playlist on Spotify. 

Nigeria currently has the most subscribed users to a paid music streaming service across Africa, despite their inclination towards free streaming services.

There is a high internet penetration in Nigeria in comparison to other African countries, and this is an indication of their potential as a huge market in the streaming services industry.

A lot of Nigerians are constantly streaming content online, which opens up opportunities in Nigeria for not just the music streaming, but the streaming services industry as a whole.

  • From our surveys conducted, respondents that were students are likely to stream Podcasts or Language learning content if it wasn’t music.
  • Earning individuals (either fully, part-time or self employed) who we can consider potential “Premium” targets are likely to stream audiobook content as well as Podcasts if it wasn’t music.

Nigerians have a propensity towards free streaming services but are willing to pay a nominal fee given the right set of circumstances, but when possible opt in to the free version offered by some paid providers.

  • Students are willing to spend a minimum fee per month of up to N500 ($1.00) per month if not using a free option as long as the variety is available. Students also admitted they will be willing to pay as much as N900 ($2.00) per month for premium subscription.
  • Earning individuals (either fully, part-time or self employed) who we can consider potential “Premium” targets, are willing to pay up to N1,000 ($2.50) per month.

Nigeria is not only bursting with music talents, but also has the largest population in the continent, and high internet penetration -- all the right ingredients for a successful music streaming industry. With the revenue growth rate of the industry projected to grow significantly, content streaming is bound to thrive.

There is an increase in providers as demand for streaming services has grown -- leading to most of the providers establishing licensing agreements with large music distribution companies.

  • From our surveys, there was a large number of respondents (over 35%) who said they are yet to subscribe to a music streaming service. This presents a huge opportunity for potential market share waiting to be captured by any of the service providers, especially the new entrants such as Spotify.

Price wars: Given the increased competition in the music streaming space both from local and international operators, price margins will inevitably be slashed across the board as they try to gain ground on one another.

The international operators in the music streaming industry will most likely gain better traction due to their premium brand equity, strength in distribution, but most importantly, their surplus cash position and capacity to incur the initial losses needed to grow -- which players like Mdundo are facing currently.  

Telecommunication partnerships as implemented by UduX (a Nigerian-based streaming app) and MTN, present an alternative adoption model that can be explored by music streaming platforms. Such partnerships would cater to potential subscribers who are active internet subscribers, keen on prioritizing other internet activities outside of music streaming and hence more inclined to be bait into free streaming options.

Music streaming in Africa could experience even more exponential growth if telecommunication operators cooperate with distribution channels and streaming services. Tying internet data purchases at a certain threshold in exchange for streaming service subscriptions could possibly impact internet data purchases and music streaming growth respectively.

Perception still matters: A sizable 20% of our survey respondents indicated that they care about artist compensation via royalties. For them, and other Nigerians like them, streaming services may be uniquely positioned as a trustworthy platform for music consumption, given that they are more likely to authenticate authorship before hosting content. 

Our findings suggest that more adult Nigerians actively subscribe to music streaming services more than any other African country. 

Artists also actively called on their fans to follow them on Spotify and stream their music -- a clear indication of the awareness being generated for the platform without any formal advertising. It may also suggest the artists being encouraged via royalties being paid to them by Spotify and hence drawing their followers to the platform.

Conclusion

In this report, we’ve undertaken a review of the music industry through a largely economic framework. We would be remiss to conclude without naming music’s place in the cultural life of people, how it transmits and preserves stories about who we are and what we value, how it can signify the value of a people to ourselves and to the world. Such reflections only serve to extend our sensibility about the serious work of growing the music industry, to hold its cultural significance alongside its economic significance.  


As our analysis indicates, access to technology, be it in the form of internet access or the availability of streaming services will continue to define possibilities for the industry’s progress in Nigeria and other parts of Africa. Equitable and responsive collaborations with multinational corporations on the continent will also shape these possibilities.


With Africa (and Nigeria leading the way as the most populous) constituting the youngest population in the world under the age of 25, it is also clear that the music trends will be largely defined by the youth's preference. As we're already witnessing with the massive global success of Afrobeats and its increasing popularity, Africa accounts for the world’s majority of the Generation Z population and will continue to influence music and other general cultural trends continuously.


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