Warner Music Group’s latest global expansion is Warner Music Middle East, a wholly-owned affiliate which will cover 17 markets across the Middle East and North Africa.
Moe Hamzeh is the new division’s managing director, having joined the label group from Beirut-based video-streaming platform m.media.
He’ll be responsible for establishing the new unit, growing its digital business, developing new signings and marketing international acts across the region. With a total population of 380 million people, and rapid smartphone adoption, WMG sees the Middle East as bursting with potential.
Music Ally spoke to Hamzeh and Chris Ancliff, Warner Music Group’s EVP of Eastern Europe, Middle East & Africa, about the thinking behind the expansion; how mobile can unlock the market’s potential; why localisation is key; and why ad-supported services are the starting point but not necessarily the end goal, among other topics.
Why expand in the region now?
Chris Ancliff: We have always been in the region – but indirectly. We operated through licensees in the past. The reason we know Moe so well is that he used to work for the former licensee of Warner Music International a few years ago. Why are we opening our own office there now? The simple answer is the massive growth in streaming and the potential growth of this particular region.
Look at smartphone penetration, for example; it varies across the region – it is higher in the UAE and lower in the North African countries – but average penetration is between 35% and 40% across the region. That is expected to double over the next five years. That inevitably will give rise to a surge in the number of people who are accessing music through their mobile devices.
We have got already a well-established and very good streaming service dedicated to the Middle East in Anghami. We are told that Spotify is opening in the region at some point – possibly this year. Saavn is also expected to open in the region this year. YouTube is clearly huge there.
The median age across this region is incredibly young – it’s 23. Add all that together and this really feels like absolutely the right time to be doing something ourselves in this region.
Will it be a mobile-only rather than a mobile-first play?
Moe Hamzeh: Smartphone reach is very high in the region – with research saying it’s 84% [of all phones]. However, internet penetration in the region is around 43%. In some territories, research finds that consumers have more than three devices. It is also a younger-generation market where most of the consumers are on their smartphones and consuming content.
Mobile subscribers are around 360 million and are expected to grow to 399 million by 2020. Consumers tend to have mobiles – even in remote areas. You see that even in remote villages, people have mobiles. This is why it’s very important.
Ancliff: This really is a mobile market. There obviously is broadband there and people are accessing services, particular YouTube, on fixed-line connections; but given the age demographics of the region, we do very much see it as a mobile market.
What shape will local A&R take? Will it be about domestic signings or treating it as a launch pad for international acts?
Ancliff: You certainly can’t ignore the local artists and local music in this region. More than 70% of music consumption there is of Arabic music. This is a stepping stone into local music. Initially it will be a relatively small operation and initially focused on relaunching and marketing our international catalogues.
That will be the initial focus; but clearly the next step will be looking at investing into local music. We believe that Arabic music not only has potential to sell in the region but also outside of the region – to the very large Arab diaspora outside of the Middle East and North Africa.
Will Arabic music, with the boom in streaming, echo what is happening with Latin Music globally?
Ancliff: Absolutely. Arabic music has been sampled [in Western music] for years now. Arabic music absolutely has the ability to resonate with Western audiences and there’s no reason why the next ‘Despacito’ can’t come out of this region.
But the other reason we are also focusing on this region is that we want to provide a full service to our international artists as well. We want to make sure that we absolutely maximise the potential of our international artists all around the globe. Clearly we cannot afford to bypass the Middle East.
Anghami is well established here, but was your decision to go into the region based more on the expansion plans of Spotify and Saavn?
Ancliff: They were absolutely a big part of our decision to go into this region. If we didn’t think there was going to be a way for us to communicate with consumers and get our music out there, it wouldn’t make a lot of sense [to go into the region without them]. Also having an A&R base there was a big part of our decision.
Hamzeh: Cairo and Beirut were always the capitals [of entertainment]. I have always said that Cairo is Hollywood and Beirut is New York. There are also lots of other genres and artists in Morocco and North Africa. There is also an expansion of international services. Apple Music is already in the region and YouTube is huge here.
The region ranks second after the US in terms of total watch time on YouTube. This is a very important indicator – and not just for music. We are even ahead of Brazil in terms of total watch time. It is a very interesting market and that is why we are launching the operation here. We are going to be able to reach and engage with a huge audience in the region.
When we spoke to Anghami, its CEO said piracy was so rampant in the CD and download eras that digital services would not launch there. Has streaming, and the move to access-based consumption, changed that?
Ancliff: Unquestionably they are right. This was a region absolutely ridden by piracy, particularly in the physical world. Physical piracy far outstripped any sales of legitimate product. It was the same with the download business. This is a pattern we are seeing all over the world.
Piracy continues to be a problem – and will always be with us – but the more that we can make consumption of music attractive and easier for consumers to do in legitimate ways, then the better it will be for the growth of our business. I think the Middle East is absolutely no different in that respect to anywhere else in the world.
Will it be like China and India where only the properly localised services – with a full range of localised repertoire – will dominate and the generalist international services could struggle?
Ancliff: Certainly Anghami has done incredibly well. They were really the first in the region to offer the full suite of Arabic catalogue. They did a deal very early on with Rotana, which is the largest player in the region. They certainly have a first-mover advantage. But Western brands like Apple and YouTube also do well in the region.
Hamzeh: YouTube is honestly a major player and a place where people are discovering artists and music – from the region and from abroad. This is where it is all happening. Facebook is also where a lot of people are discovering and engaging [with music] and it will be very important to drive traffic to digital music services.
The local players like Anghami are important, but it doesn’t mean at all that international services will not be able to have a market share as well. As long as they understand their market, of course. The advantage of Anghami, besides being early into the region, is that they know the market. This is very important. As playlists and curators, they know the region.
How do you see the market splitting between subscription and ad-supported services?
Ancliff: I think initially that the free services are going to dominate – as they do in other parts of the world. But there is also a very large and affluent middle class right across the region. We do believe there is potentially a very healthy market for paid services as well.
Will Warner be going on an acquisition spree of local labels to quickly build its share in the market?
Ancliff: The Middle East is not quite the same as some of those other markets [like China and India] in the sense that you don’t have lots and lots of small indie players. You do have some very large players in local music such as Rotana and MBC Platinum. It’s too early for me to be able to tell you whether or not we are going to get into the market by way of acquisition. We are open to anything.
We will look at acquisitions at the right time and when that makes sense for us. We will look at joint ventures. And we will look at direct signings. What form getting into the region is going to take, I can’t say right now. All of those things are possible. More than 70% of consumption in the region is of Arabic music, so unquestionably it makes sense for us to want to be a player in Arabic music.
Why are people now waking up to the potential of the Middle East?
Hamzeh: The Middle East is not one nation. It is a region unified by language, but as economic powers, each territory is totally independent. There are also some countries with complex political situations like Libya, Syria and Yemen. There are some countries that are underdeveloped and have their own specific political situations. So you can’t say that the whole Middle East is one entity like China, India or South Africa.
Ancliff: The reality is there are 380m people there. You can’t afford to ignore populations of that size.