Universal Music Group and Samsung Offer Digital Music Service

Universal Music Group and Samsung Offer Digital Music Service

SERRAVAL, FRANCE â€" The music business recently celebrated a milestone in the form of its first annual revenue growth since 1999, but one region, Africa, was unable to join the party. Digital music, responsible for the improvement in the industry’s brighter overall outlook, has failed to catch on across much of Africa.

But that may be about to change, as new local and international digital music services open or expand, suggesting that industry executives and investors see potential for profit.

In one of the highest-profile moves so far, Universal Music Group and Samsung announced this month the creation of The Kleek, a Pan-African digital music service. It features music from Universal’s international catalog and from local artists like the Power Boyz in Angola, DJ Vetkuk in South Africa and W4 in Nigeria.

In December, South Africans were given access to the iTunes digital music store from Apple. Around the same time, one of the leading Internet streaming music services, Deezer, a French company, expanded across much of Africa. And in several countries, including Nigeria, local digital music operations like iRoking have started to attract large numbers of listeners.

“I think there’s a feeling that let’s give it a try, where before everyone was saying, ‘I’m just going to sit on my ball and refuse to play,”’ said Simon Dyson, an analyst at Informa, a research company in London.

While digital music now accounts for more than half of the revenue in the music industry in the United States, and is finally making a substantial contribution to the bottom line in Europe and some Asian markets, the challenges remain formidable in Africa, analysts say.

Piracy is rife, with renegade CD factories thriving and street vendors doing a brisk business selling digital memory cards already loaded with the latest hits. Except in South Africa, there is little or no official music-licensing structure across much of sub-Saharan Africa and often no way for musicians and other rights holders to collect revenue from sales or performances of their work. Even in South Africa, digital music still accounts for less than 10 percent of sales, analysts say.

Broadband connections, especially the fixed-line variety, are unavailable or remain a luxury in much of Africa, so downloading or streaming music or other media to desktop computers is a niche market. So most African consumers listen to digital music on their mobile phones, and in many markets, selling ringtones is the main route to revenue.

Informa estimates that 70 percent of the African music business consists of local repertoire, with international artists, who dominate elsewhere, representing only a minority of what people are listening to. That presents an additional challenge for the major record labels and digital services based outside the region, which tend to generate the bulk of their sales from a handful of hits.

“It’s easy to turn on digital services in new markets,” said Francis Keeling, the London-based global head of the digital business at Universal. “The difference is, are they going to have local content, editorial teams and realistic pricing, along with active marketing. We looked at the market for a long time and decided that Africa needed its own service, aimed at African consumers.”

Universal says it wants to sign other major record companies to The Kleek and has also struck agreements with a number of African labels. Rather than offering downloads, like iTunes, or on-demand streaming, like Deezer and Spotify, another digital service that is popular in developed markets, The Kleek offers a radiolike experience.

Users of the service can choose from playlists consisting of local music or international hits, interspersed with artist interviews, concert reviews and gossip, streamed to cellphones. Because of limited bandwidth, the recordings are short, generally 10 minutes or less.

“It allows you to get a window on what is hip and happening in each territory,” Randall Abrahams, managing director of Universal for sub-Saharan Africa, said by telephone.