Music online music streaming

Russian market

Available services:

• Google Play Music (Google)
• Zvooq.ru ( Dream Industries )
• Yandex-Music (Yandex)
• iTunes (Apple)

2023

Market growth by 10-15% to 24-26 billion rubles

The volume of the Russian music services market in 2023 increased by 10-15% compared to the previous year and amounted to 24-26 billion rubles. Such estimates were named to Kommersant by market participants. The article was published on April 15, 2024.

According to the head of Yandex. Music "Alexandra Sagalovich, the music streaming market is growing primarily due to subscriptions and the number of people willing to pay for them. In addition, the growing penetration of smart speakers, which require a subscription to music services, contributes to the rise of the market. By the end of 2023, the number of users of music subscriptions increased by 20% compared to two years ago, exceeding 23 million people.

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The publication notes that the main risk factor for the market streaming services are called political events that still greatly affect foreign content providers.

Certain political events in the information field can undermine this stability, as it was already in 2022. For example, foreign partners will refuse to work with us even through third-party structures in the CIS, says Alexandra Sagalovich.

In her opinion, one of the growth drivers of the Russian music streaming market may be "the emergence of local content and new artists." According to the general producer of the audio service "Sound" Sergei Baldin, an equally important point of market growth is the introduction of artificial intelligence and the promotion of songs on social networks.

Major world music labels, including Universal Music Group, Sony Music and Warner Music Group, left Russia after the start of the Russian military special operation in Ukraine. But already in 2023, the seized catalogs of foreign artists appeared in services, including in "Sound."^[1]

How Russian streaming shared the audience of Apple Music and Spotify

Users of foreign music services were divided among themselves by Yandex.Music and Sound. In total, over the year, Russian music streaming increased its audience by a quarter, and the consumption of Internet traffic on them increased by 36%. As shown by the "Music Lover Index," compiled by Yota analysts based on subscriber traffic for January-September 2022 and 2023, the most music is listened to online in Siberian cities. Yota announced this on October 27, 2023.

After leaving the Russian market of a number of foreign services (Spotify, Deezer) and the difficulties that began with paying for subscriptions (Apple Music, YouTube Music), many users switched to domestic music streaming. Thus, 65% of its audience in the Russian Federation and 78% of Russian traffic lost YouTube Music over the year, and Apple Music missed 15% of listeners and 41% of traffic, respectively.

The largest increase for the year was shown by "Sound": the number of its users increased 5.2 times, and traffic increased by 170%. In second place in terms of dynamics is "Yandex Music": the audience of the service increased 1.5 times, and traffic - 2.5 times (+ 155%). At the same time, the indicators of the service VK Music"" changed slightly (+ 0.4% of users and + 1.4% of mobile traffic).

According to Yota, the main increase in listeners (93%) in 2023 was due to users over 25 years old. The audience of 16-25 years old, which is the most active in the VK Music service, grew slightly - by only 7%.

Two-thirds of new users of Russian music services are men. In general, the male audience in this segment is 30% higher than the female, and in terms of the volume of traffic consumed, men listen to music by almost a third (32%). According to the preferences of services, the tastes of the sexes coincide: the first line in popularity is "VK Music," the second - "Yandex Music," the third - "Sound," and the fourth and fifth - Apple Music and Zaycev.net, respectively.

Based on the traffic of streaming services from January to September 2023, Yota experts compiled the "Music Lover Index." It shows the volume of music traffic (in gigabytes), which falls per listener per month in a specific city of Russia.

The first six lines of the rating were taken by the cities of Siberia. Tomsk became the leader with an index of 1.5. This means that Tomic on average listens to audio streams in the amount of 1.5 GB monthly. 1.5 GB corresponds to 20 hours of audio, or approximately 378 tracks. The second place was taken by Omsk with an indicator of 1.43, the third - Kemerovo (1.42), the fourth - Barnaul (1.41), and the fifth and sixth are divided by Novosibirsk and Krasnoyarsk with an indicator of 1.39.

The top 10 also included, Ulyanovsk,, and Penza. Khabarovsk Kaliningrad At the same time Moscow , it turned out to be only on the 26th line (1.03), and - on the St. Petersburg 15th (1.2). As Yota analysts found out, the top ten most popular from smartphones which subscribers listen to music online include nine models at once (from to Apple iPhone 7 the iPhone 14 Pro Max) and one model - 9S. Xiaomi Redmi NFC

The Ministry of Digital Development refused to give IT benefits to music services

On July 18, 2023, it became known that the Ministry of Digital Development did not support the initiative to provide IT benefits to music services. The National Federation of the Music Industry (NFMI) addressed the department with a corresponding question. Read more here.

2022: Russian market shrinks by 30-50% after Spotify, Apple Music and YouTube Music quit

The volume of the Russian music streaming market in 2022 reached 5-7 billion, rubles which is about 30-50% higher than a year ago at 9.5 billion rubles. The agency InterMedia cited such data in early February 2023.

According to the editor-in-chief of InterMedia Yevgeny Safronov, the main reasons for the decline are the departure or reduction in the activity of leading streaming services, major companies, payment systems, as well as the departure of "a significant number of active users" from the country. Safronov points out that Russian platforms work according to the ecosystem model, in which the income from streaming is not allocated separately.

The Russian audio service market contracted sharply after the departure of Spotify, Apple Music and YouTube Music

The source of Kommersant in one of the major digital music distributors agrees with such estimates. According to him, this segment grew in Russia mainly due to the entry of large players into the market - Spotify, Apple Music and YouTube Music.

Some Russian users switched to domestic services, but not everyone pays for a subscription - often people use free trial periods, switching from one service to another, the source said. In addition, the demand for domestic streaming is not so high due to the loss of part of foreign catalogs, he added.

According to the head of MTS Music Maxim Petrovsky, the market grew by 20%. According to him, those who are used to paying for subscriptions continued to do this in the new conditions. At the same time, he agrees that the departure of overseas players has led to a decrease in the average cost per audition.

The decline in the market affected the income of Russian artists, the source of the newspaper in the industry notes. According to him, the main funds were brought to Apple Music through higher subscription prices and global coverage and YouTube in general through the monetization of music in videos.^[2]

2018: The revenue of the music streaming market in Russia amounted to 4.7 billion rubles

On May 17, 2019, J'son & Partners Consulting (Jason & Partners Consulting) provided the results of the study "Russian Music Streaming Market. Results of 2018. "

Streaming is the fastest growing segment and the main driver of growth in the entire music industry throughout 2014-2018. In the near future, it will remain the main way of consumption and. monetizations audio content

J'son & Partners Consulting predicts an increase in music streaming revenues in the world to $14.3 billion in 2021 (CAGR 17%), and the number of paid subscribers will increase to 446 million. Growth will be supported by emerging markets (Brazil, Mexico, India, Russia), as well as countries with late adoption of music streaming (for example, Germany and Japan).

As for Russia, listening to music online has already become a stable habit, 61% of Russian Internet users have already tried music streaming services. At the same time, 48% listen to music almost daily, and 69% do it three times a week and more often.

In 2018, the revenue of the music streaming market in Russia amounted to 4.7 billion rubles. J'son & Partners Consulting predicts that the full potential of music streaming services has not yet been realized, and the market will grow intensively between now and 2021. According to the forecast in 2021, it will reach 18.6 billion rubles (CAGR will be 58%).

In developed countries, there are from 7 to 10 music streaming services. In May 2019, there are already 8 players in Russia and the market is close to saturation. An analysis of the market's prospects showed that its structure will change due to the growth of the total number of subscribers and advertising costs, as well as the marketing policy of current players.

2013

Data from J'son & Partners Consulting

According to J'son & Partners Consulting (September 2013), it is 2013 that should be a turning point for the Russian online distribution market for digital music content. The total market volume will reach 8 million USD. The market growth rate in 2013 will be 158%. Such growth rates will lead the Russian market to unconditional and absolute leaders among the fast-growing markets of the global music industry.

The subscription will remain the fastest growing method of monetization, this is the model J'son & Partners Consulting considers as the most promising in both the Russian and world markets for digital music content.

J'son & Partners Consulting estimates that the track and album sales share will be 80.3% in 2016, while the combined share of the subscription and advertising model will grow to 19.7%.

The main drivers of market growth will be iTunes services (according to J'son & Partners Consulting, its market share will be more than 50%) and Google Music, which was launched on the Russian market in October 2013.

According to J'son & Partners Consulting forecasts, in 2014-2016, the growth of the Russian digital music content market will continue, although not at such a high pace. More than half of the volume of the Russian digital music content market in 2013-2015 will come from iTunes revenues.

According to Yandex, based on the use of the Yandex.Music service by users, the following market trends can be distinguished:

• Users prefer Russian music: despite the fact that domestic content occupies about 1% in the service catalog, it accounts for more than half of the listens.

• The main platform for listening to music remains the web: the proportion of listening in the web and mobile versions of the service is 95% and 5%, respectively.

• The monthly number of unique Yandex.Music users is about 13 million people.

• After 1.5 months after the launch of the mobile application for Android, the number of listens increased by more than 2 times.

• The main barriers to the development of the service are the imperfection of legislation in the field of copyright and related rights and the widespread use of pirated content.

Alexey Nikolaev, an independent music market expert, lecturer at the RMA business school for dyscilin "Management in the music business and entertainment industry," in an interview with the J'son TV project, described from his point of view the development of the market, as well as its drivers and barriers:

• "Copyright holders began to overestimate the digital market and, above all, structure their directories" (about the arrival of iTunes)

• "In pre-iTunes times, artists and labels handed out rights without really thinking"

• "For any music service, the moment of discovery, recommendations and search for artists is important"

• "The big problem with our market is that we do not have a community that collects deductions for" mechanical rights "(mechanicals) from Internet platforms for downloading and for streaming"

• "Google Music will be easier because the standard that was set by iTunes taught labels how to work"

Spotify launch rumours

Until 2013, the digital audio content market in Russia is not expected to grow actively (J'son & Partners Consulting, April 2012). The volume of sales of audio content via the Internet by 2013 will not exceed 3 million USD with existing barriers, and the outlook is estimated as moderately optimistic.

In September 2013, it became known that the Swedish Spotify service could launch a music service in Russia in the first quarter of 2014.

2012

The volume of the Russian music content digital sales market in 2012, according to J'son & Partners Consulting, amounted to 3.1 million USD against 2.55 million USD in 2011. This figure includes both direct sales (more than 65% of the Russian music digital content market), advertising revenues, and a subscription model.

Until the end of 2012, the situation on the Russian market was difficult, since many local players, such as Yota Music, Fidel, Stream and others, left the market, refusing to develop this business area. Such a difficult situation was caused by a complex of reasons: a very high level of piracy played a role, and difficulties for legal sites in the field of copyright cleaning, and the policy of large copyright holders. Of the strong Russian players, by the end of 2012, only the Yandex.Music streaming service remained on the market, which is not monetized directly in the web version (an advertising model is used).

However, in 2012 there was an event that both users and experts and market participants expected for a long time: Apple launched the iTunes store in Russia.

The appearance of such a player on the Russian market has greatly changed the situation. In particular, copyright holders who were not so interested in small venues with unclear development prospects became much more interested in promoting their music products through Apple's digital store.

Closing the Fidel.ru

In the spring of 2012, the Fidel.ru project, which owned a legal digital catalog of several million music tracks, closed after six years of existence due to poor payback. Now Fidel Solutions, which developed this service, is preparing a new Tracksflow.com project in which it will use new models of cooperation with copyright holders.

Fidel.ru was distinguished by the fact that he was the first in the CIS to sign a contract with the record company Universal Music, and later with all other majors. Traffic on the portal reached 120 thousand unique visitors per day. Nevertheless, the company could not even get closer to the payback of the project.

According to the head of Fidel Solutions, under the terms of the contract, copyright holders want at least 50% of the service's revenue for related rights and another 10-12% for copyright. The company spends 3-5% of revenue on billing.

Opera Mini paid service

In November 2012, it became known that Opera Software was launching a music project, Russia Artem Zinoviev, its director of business development in the CIS, told Vedomosti. It will be aimed at mobile users browserOpera Mini for smartphones and ordinary mobile phones, although users of other browsers will also be available. The service will work according to the subscription model: for about 150 rubles. per month it will be possible to download music without restrictions from a catalog of more than 2 million records - both Russian and foreign copyright holders. Only users will not iPhone be able to download music (due to restrictions), but operating system iOS will be able to listen to it in streaming mode.

Russia is one of the key markets for Opera. Therefore, first the service will work in Russia, and only then, if it turns out to be in demand here, Opera will start working on its launch in other countries, Zinoviev says.

The maintenance of the Opera music store and the cleaning of copyright and related rights is undertaken by its global partner - Rights Communications (part of the Ikom group of companies). The project's business model is based on revenue sharing, says Nikolai Okorokov, managing partner of Rights Communications. He does not disclose the details, but he is sure that the project will quickly pay off: "according to the most restrained forecasts," by the end of 2013 the project will have at least 1.5 million active users. According to a person close to the participants in this project, the deductions of the service to Russian labels will amount to 15-25% of the cost of the track, Western - 30-40%, and mobile operators whose billing will bill users will receive 50%.

Opera is interested in launching the service with Russian mobile operators directly and is negotiating with them to include the use of this service in their tariff plans, Zinoviev says. The operator who launched the service first will receive the maximum effect, as it will attract a youth audience, for which the service is designed, he believes. MTS is studying Opera's offer, says MTS representative Valeria Kuzmenko, but there are many opportunities for free access to music on the Internet, so the partnership requires a thorough analysis of commercial conditions. VimpelCom is always ready to discuss opportunities that are interesting for subscribers, its vice-president Olga Turishcheva told Vedomosti. True, VimpelCom is already cooperating with Google, ensuring that its subscribers get access to Google Play services, she recalls. A representative of Megafon did not comment on the negotiations with Opera.

The market has just begun to develop, there are few products, including because Russians have no habit of downloading legal music for money, says Konstantin Vorontsov, head of the Yandex.Music service (there are about 4.5 million entries from 120 copyright holders in his catalog). The popularity of subscription services, according to him, is actively growing all over the world, it is in this direction that the entire industry is moving, but the quality of service strongly depends on the completeness of the catalog. In addition, such services require investments that can only pay off in the future, he warns^[3].

2011: Omlet.ru closes music distribution

At the end of 2011, MTS decided to abandon the "Music" section on the Omlet.ru portal, which in 2012 will entail a decrease in sales in this segment.

In the general structure of the Russian digital sales market for audio content, the main share (99%) is occupied by sales of mobile content. According to J'son & Partners Consulting estimates, music sales through mobile channels increased by 10% in 2011 compared to 2010.

Drivers and barriers to the development of the audio content market in Russia

J'son & Partners Consulting highlights the following drivers and barriers to this market.

Barriers:

• The availability of a large number of musical compositions in open sources limits the need for the audience to legally use it.
• Low purchasing power compared to North America and Western Europe - the largest markets for digital distribution of audio content.
• The cost of music distribution rights among the largest music majors remains high for the Russian market.
• Despite the growing popularity of payments on the Internet, the problem of low penetration of bank cards remains, as well as the fears of Russians to use them to pay for online purchases.

Drivers:

• Growth of both fixed and mobile Internet users in Russia.
• Increasing the availability of mobile devices on Android, iOS, Windows Phone platforms has a positive impact on the development of mobile services, namely specialized applications for accessing music in the phone.
• Positive trends in the politics of music majors. Major labels are ready to discuss new models of collaboration and music sales.
• The growing popularity of the use of electronic payment systems and the growth of the volume of payments over the Internet in general.

2010:207% sales growth

According to J'son & Partners Consulting estimates, according to the results of 2010, the volume of music sales via the Internet increased by 207% compared to 2009, the main reason for this growth was the launch of content stores from operators.

The largest participant in the mobile audio content market Russia in the first half of 2011 is a telecom operator, and MTS MTS was the largest participant in the Russian digital music distribution market via the Internet in the first half of 2011 through the project Omlet.ru.

The closest competitor of the Omlet.ru is the Trava.ru project from the telecom operator Megafon. However, business sales of audio content are not highly profitable.

2008: Fidel.ru and Soundkey are market leaders

Fidel.ru and Soundkey are the two largest music stores in Runet, accounting for up to 70% of legal online music sales, says Elena Krylova, an analyst at iKS-Consulting. Other notable players in the legal music market in Runet:

• imobilko.ru,
• muz.ru,
• stereokiller.ru и
• owned MTS by the portal Omlet.ru.

The leaders of Fidel and Yandex.Music agree that the streaming audio market in Runet is small. iKS-Consulting analyst Elena Krylova said that she conducted the last analysis of Runet audio sites in 2008, and then the volume of sales of legal audio by companies with direct contracts with copyright holders (that is, legal from the point of view of modern Russian law) amounted to 280 million rubles.

According to her, the volume of audio sales from sites legalizing content with the help of agencies for collective copyright management (which became illegal after the adoption of the 4 part of the Civil Code) in 2008 amounted to about 800 million rubles^[4].

• 3 million US dollars a year - this is the maximum volume of the Russian market for legal music on the Internet, according to Elena Krylova from iKS-Consulting and Sonya Sokolova from Soundkey. Boris Golikov's estimate is even more modest - $2 million per year.

2.5 million US dollars a year - the amount of guaranteed payments to copyright holders, which should be deducted by an online store offering a complete and up-to-date catalog of music, says Sokolova.

Global market

2021: Streaming continues to grow in U.S. music distribution market

2019

Streaming absolutely dominates the US music distribution market

Paid subscriptions make up 80% of the US streaming market

Five years ago (not shown on the graph), the share was only 25%, and year-on-year revenue grew by 33%.

Data: Mid-Year 2019 RIAA Music Revenue Report, Visualization: Axios

2018: Streaming becomes biggest music sales channel

2017: Thanks to streaming, music sales have returned to growth

Evolution of how music content and its media are distributed

2012:20 million subscribers to music services

The global size of the music market in 2012 amounted to 16.5 billion USD, including digital and physical sales. According to the results of 2012, the digital format accounted for about 5.8 billion USD, which is 8% more than in 2011.

In the world ranking of 2012, the United States still ranks first with a music market of 4.48 billion USD in total for all segments - the indicator decreased by 0.5% compared to the previous year. Japan is in second place with 4.42 billion USD, the UK is in third - 1.33 billion USD. South Korea is 11th with 188 million USD.

The popularity of mobile music download applications is growing worldwide, as digital audio content purchases offer convenience and portability, as well as because the functionality of applications is expanding every year.

Downloading is still the main way to buy digital music, but subscription services are confidently increasing their audience, according to a 2012 report by the International Federation of the Recording Industry (IFPI). Two years ago, there were 8 million subscribers to music services in the world, and now there are already 20 million of them. The share of subscriptions in digital music sales in the world in 2012 was 13%, in Europe - 23%. The Russian music market, according to IFPI, is less than 1% of the world.

2011

Data from J'son & Partners Consulting

According to a study by J'son & Partners Consulting, in 2011, the global digital audio content market grew by 7% to 6.3 billion. USD. The countries considered in the study - the USA, Japan, South Korea, Great Britain - account for about 70% of the global audio content market. Russia's share in the global market is insignificant and amounts to less than 1%.

Mobile phone audio content sales accounted for about 68% of the total audio content market in the world. The dominance of digital audio content sales through mobile networks is due to the convenience of using audio files on mobile phones, which have firmly replaced audio players in the mind of the subscriber, and now it is almost impossible to meet a mobile terminal without support for playing music files.

At the same time, it can already be noted that there are trends towards the growth of the segment of online sales of audio content in the world, since the share of this channel increased by 2% in 2011.

The greatest contribution to the development of the digital sales market for audio content via the Internet was made by the Apple iTunes multimedia service, through which more than 10 billion units of audio files have been sold since 2003. In 2011, Apple iTunes accounted for 70% of all music downloads in the United States. It is natural that the digital sales market for audio content is the most developed in those countries in which Apple's service is available. Apple's main competitors in the digital audio content market are Amazon, 7digital, HMV and Tesco.

How labels' squeeze juices' from online music services

In December 2011, veteran of music Internet services Michael Robertson (Michael Robertson), founder and former executive director of the MP3.com service, the current head of the MP3tunes and DAR.fm service, published a new note in GigaOM, in which he spoke about the secret requirements of record companies put forward by them when concluding contracts for licensing content with music services^[5].

According to Robertson, these requirements are extremely tough for music services and very one-sided, providing record companies with very favorable conditions. Because of this, these requirements were kept in strict secrecy and became known only now, the creator noted MP3.com.

So, under the terms of all contracts with music services, labels actually have every right to unilaterally set prices for music that users buy. Also, when signing each contract, record companies claim ownership of a share in this service.

And to sign the agreement, services are forced to pay them quite large amounts of payments initially, which immediately establishes a high money barrier for many startups. "Large amounts of money are needed in order to simply enter this market. In my opinion, this very much strangles innovations in the services themselves and their business models, "the author believes.

In addition, labels require companies to which they license rights to their content to provide very detailed reports with all data, including each user's accounts, purchase statistics, etc. "Many labels make additional demands, such as providing non-payment reports, such as shares of different categories of music in sales. Labels simply force music services to do business analytics for them. I don't think there are any other industries where this is standard practice, "Robertson writes.

Another important clause in contracts with all major record labels is the requirement that each of the labels be given the best terms of the contract, if any have already been granted to any other label. "This is a form of collusion as each of the labels gets the best terms of the contract that the other labels are seeking. That is why it is usually quite easy for music services to make contact with one of the labels (usually EMI), but it is very difficult with everyone - they can agree to not the most favorable conditions, knowing that other labels will demand more favorable prices for themselves, "says Robertson.

In addition, each contract provides for a very high level of secrecy, strictly prohibiting services from disclosing any information regarding their agreements with record companies. Violation of this condition threatens music services with an instant break of the license agreement and numerous lawsuits.

Thus, the largest record companies, of which today there are four (the "big four" - Universal Music, Sony Music, EMI Group and Warner Music), actually completely control the online music market, giving Internet services no alternatives other than the adoption of the terms of contracts put forward.

According to the creator of the MP3.com, due to such terms of contracts with labels, popular music services:

• Spotify,
• Rhapsody,
• MOG,
• Rdio

and the rest - will never be able to be truly profitable, since most of their income is taken by the "big four."

Notes