Music streaming services are still struggling to make profits in Asia on the back of prevalence of piracy and low advertisement, according to a recent report by consulting firm McKinsey and Company. (JG Screenshot)

Music Streaming Service Popularity Increases Faster Than Profitability in Asia: McKinsey


NOVEMBER 04, 2016

Jakarta. Music streaming services are still struggling to turn a profit in Asia on the back of rampant piracy and low advertisement, a recent report by consulting firm McKinsey found.

The "Beat of Progress: the Rise of Music Streaming in Asia," published on Thursday (03/11), found that Asia is a dynamic market for music stream, as consumers in region took to the platforms within a year, as opposed to digital music and streaming service penetration taking five years in the rest of the world.

"Despite the growing popularity of music streaming among consumers, the path to profitability for these services is less straightforward," the report said.

Asia boasts 44 percent of global internet users in 2015, but the region has so far only accounted for 14 percent of global digital music revenue.

Service providers face problems, such as limited end-user ability to play music through their low-end smartphones; low willingness to pay for subscriptions due to piracy and expensive data packages; low advertising prices; and high content costs.

"In markets such as Indonesia, low-end smartphones cost as little as $75 per device," the report said. "These devices are slower and possess less memory capacity than other smartphones, posing a dilemma for music streaming services."

On the streaming services' part, the low rates for advertising on music streaming platforms also limit marketing revenue.

The effective cost per 1,000 impressions (eCPM) remains low at $5.77 in Singapore compared to $9.68 in the United States and $10.65 in the United Kingdom, the report showed.

"Many advertisers in Asian markets have yet to realize or take advantage of the opportunities offered by digital music marketing," the report said.

Some of the players in the streaming business, however, have found the right strategy to unlock the industry's potential.

The report mentioned several streaming service providers, but only Joox — a regional streaming service from the makers of WeChat — that tops other services in Thailand, Hong Kong, Malaysia and Indonesia.

"Innovations by leading music streaming providers are shedding light on what a more sustainable path might look like," the report said.

Joox, the report said, localized its content to suit each country's taste, actively engage users and provide an attractive platform for advertisers.

Joox's app has been downloaded by 50 million users to date who spend 72 minutes per day, four days a week listening to music through the app on their smartphones.