Spotify is in talks with Vodacom on a partnership that would mark the music streaming service’s first foray onto the African continent, according to two people familiar with the negotiations.
Vodacom, a unit of Britain’s Vodafone Group, planned to offer its wireless customers subscriptions that included a limited amount of free data to access Spotify’s music library, said one of the people, who asked not to be identified because the matter is private.
An agreement with the biggest local cellular carrier would let Spotify enter Africa after starting in more than 56 countries since it was founded in Sweden in 2006.
The negotiations underscore the race among African telecom carriers to link up with content partners as music and movie downloads over the internet and smartphones surge.
MTN, Africa’s biggest cellular operator, was in discussions with an Asian television content provider, sources said in April. Fixed-line carrier Telkom has held talks with media companies including Netflix and Comcast about using its network to deliver content.
“It doesn’t mean 30 million people in South Africa are willing to pay a monthly subscription for a service like Spotify, but entering the market via this kind of partnership exposes the service to more people,” said Paul Verna, an analyst at digital researcher EMarketer.
Vodacom spokesman Richard Boorman said the firm was considering content-sharing deals. He declined to discuss talks with specific partners. Alison Bonny, a Spotify spokeswoman, declined to comment.
Vodacom’s shares fell 0.54 percent to close at R126.32 in Johannesburg yesterday. Vodafone shares dropped 0.91 percent by 11.30am in London.
“There’s a great deal of excitement about the potential for developing the music markets in Africa and a lot of that is to do with the rising broadband penetration rates, but particularly mobile penetration rates,” Adrian Strain, the director of communications at music industry research company IFPI, said. “The spread of smartphones is forecast to be impressive in the next few years.”
Vodacom has 31.5 million customers in South Africa. Spotify, the world’s biggest music-subscription service, has 10 million paying users while a further 30 million listen for free through ad-supported services on computers.
Should an agreement be reached, Spotify would compete in Africa against Finland’s Spinlet, London-based Rara Media Group and Paris-based Deezer, said Steven Ambrose, the chief executive of telecoms advisory firm Strategy Worx.
“Spotify would be a big content coup for Vodacom if they are the first to offer it with free data access. A tie-up will tip the scales on music streaming adoption in South Africa,” he said.
In a market with below-average broadband speeds, South Africans spent R90 million on digital music in 2012, 7.3 percent of its recorded music market, according to a report by PwC. While the figure is set to rise to 14 percent by 2017, or R132m, that is a fraction of what Americans and Western Europeans spend on downloaded music.
Vodafone, which owns 65 percent of Vodacom, said last month that bundling high-speed internet access with content was driving higher data usage, a trend that may lead to an increase in monthly bills and help reverse voice revenue declines. - Bloomberg