One-size-fits-all might work for tube socks and ponchos, but not for digital media.
So says Tyler Goldman, the North American CEO of Deezer, whose streaming music service is now available in more than 180 countries, boasts over 16 million active monthly users, 6 million paying subscribers, and the largest music library in the world with over 35 million tracks. Deezer definitely strives to be different, and Goldman is banking on that difference to make his service popular among a sea of ad-supported streaming music sites.
“Deezer’s had great success. We’re the second largest provider in music-on-demand globally,” explains Goldman. “But when you look at the category, there’s only roughly 45 million people today paying for a service, so there’s an enormous opportunity to provide better services that people will pay for.”
“The industry is still relatively underfunded.”
Consider that Netflix alone in video on-demand has 55 million paying subscribers and you can see music on-demand has a way to go.
“There’s never been a better time to be a TV consumer, there’s quantity and great programming,” says Goldman. “But the music industry hasn’t reached that level yet; the industry is still relatively underfunded, the players aren’t doing that well economically, and so I think it’s a question of improving the experience.”
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Part of the problem is that music labels are squeezing the margin trying to get as high a percentage as possible. Then you have to factor in the 30 percent cut companies like Apple take if you subscribe to a music service through an in-app purchase. The music on-demand providers are left with little to reinvest in improving the experience.
Goldman points to a surprising example of success in the industry: Sirius XM. The audio subscription company has a market cap of $22 billion based on 27 million subscribers paying $15 a month. He attributes the success to the fact that Sirius offers a programmed experience that’s tailored to listeners.
“I think there’s a lot to learn from what they’ve done” he says.
The way ahead
Goldman’s idea is to target specific audiences in much the same way as cable and satellite TV did, with programming that caters to their interests. He doesn’t see major problems for music streaming services in the ownership versus rental argument, or piracy, nor does he believe that the lack of specific holdout artists is really harming adoption. What he thinks is really lacking is the quality of the experience, and a one-size fits all approach can’t deliver the tailored service people really want.
“What people want is more of what they love. We want to better serve you what you love,” he says.
Looking at the success Sirius has had, Goldman talks about how Deezer could take things to an entirely new level because of the flexibility of Internet delivery. They can combine live broadcasts with on-demand services and they have a truly global reach. They also know what their customers are listening to, and that makes it much easier to cater to them.
“In the next iteration of Deezer, you’re going to see a much greater bundled value. You’re going to see us focus on specific audiences and build experiences including exclusive and windowed content for those audiences. We may target different audiences, but the end game is always the same, which is the user gets all of it.”
Picture a specialized classical music hub with exclusive recordings and live events. Deezer plans to build that kind of offering out for each major genre of music, from dance through jazz. Paying a higher subscription may be about getting the latest releases first, or gaining exclusive access to a concert.
In the battle to win over an American audience, Deezer has flown a little under the radar so far, and Goldman explains that it has been building new products and targeting different consumer segments.
“In the U.S. we started off with audio enthusiasts who care about a number of things, including sound quality.”
“We need to move beyond a music on-demand do-it-yourself service.”
To that end Deezer launched an exclusive Elite service in partnership with Sonos, offering high quality lossless FLAC streaming for $15 per month for owners of Sonos systems. Part of the reason for this is that it allows them to market through home installers, so the audience gets an explanation of the difference they’ll hear in audio quality.
There’s also an exclusive partnership with Bose, offering Deezer’s standard streaming service at $10 per month, this time only on Bose speakers.
At the lower end, we have the acquisition of AT&T’s Muve service, which brings 2.3 million subscribers into the fold. It delivers a mobile-only experience for prepaid customers at $5.50 per month. It’s marketed in 3,500 Cricket stores and offers a more limited service in terms of quality and choice. Goldman explains it has really taken off, partly because it’s a great value, but also because it’s sold through retail stores. There’s an opportunity for staff to really sell its merits and explain it to prospective customers.
Deezer also acquired Stitcher towards the end of last year, folding 35,000 radio shows and podcasts into the mix.
“Talk content is incredibly important,” explains Goldman. Podcasts have really taken off in the last couple of years. There are more than 1 billion podcast subscriptions through iTunes now. Traditional talk, news, and sports radio remains hugely popular. Adding this kind of content on top of a huge music library makes Deezer a more rounded and attractive prospect.
There’s a coherent plan in play here for mass-market adoption of paid audio services starting with a defined audience, an offering that meets their needs, targeted distribution, and marketing and pricing that fits.
“The key driver of adoption will hinge on providing better quality programming for different types of users,” he says, “We need to move beyond a music on-demand do-it-yourself service.”
In the past Deezer has targeted audiences geographically, and Goldman is unequivocal about the importance of local content, especially in the talk space, but now they’re looking at use cases like home audio, and the potential of targeting specific genres.
“People generally know what they like….and I think it’s a question of who can give it to them the best.”