Netflix’s evolution: Go from physical product to digital, once digital change the entire product. This will happen in most markets.
— Aaron Levie (@levie) January 21, 2014
“Convert to Digital and then change the entire product.” That’s how my mind summarised it, anyway. That tweet from Aaron Levie is probably one of the most intriguing things I’ve read on Twitter. It seems to me like that will be the recipe for success this century. Find a physical product, switch it to digital, then change the product and “watch the money pile up”.
Coincidentally, a few days after seeing the tweet, I came across UK music sales numbers for 2013. Streaming, the entertainment channel du jour, seems to be coming into its own very nicely. , significantly outpacing physical sales in year-on-year growth (overview available here). In the US, Netflix, which inspired the Levie tweet, has seen a over the same period.
Music streaming is going to have to peak sometime soon, though. This piece compares 15 streaming platforms (including the just-come-online Beats), each with a catalogue of over 20 million songs. That it omits the largest players in the African market can mean any of several (good or bad) things, depending on how you want to slice it. However, if Spotify, the largest (by reputation, if not revenues) reported a net loss of £49.1 million for 2012, is there really going to be gold at the end of this gold rush? It’s not all doom and gloom however, as streaming revenue in the UK this year was over £100m. Unclear how much of this is profit, but as this piece and this one show, Amazon (for example) continues to defy the huge-revenues-no-profits logic.
And even if streaming peaks in the Europe and the US, with all their internet saturation, Africa’s numbers suggest that an Africa “Boom” is still possible. PWC’s South African Entertainment and Media Outlook (2013-2017) – which includes Nigeria and Kenya (download links available here) contains lots of relevant data. The Nigeria report says, amongst other things, that the fastest growth area in consumer spending will be internet access, with a compound annual growth rate of 49%. The 2017 Nigeria internet market is projected to be worth US$5.6bn and mobile is expected to dominate this, with the current 8 million mobile broadband subscriptions estimated to rise to over 40 million in 2017. That’s 40 million potential music streaming customers in Nigeria alone, over the next 3 years. If we use the Spinlet N3,000/month subscription to attempt a layman’s gauge of the market, that’s roughly a potential annual pool of [Error, Error, Error]. Chuckle.
So, what product will YOU convert to digital and then change entirely?
