“The market in India just continues to become more millennial and more digital every day, and more driven by the mobile handsets. We’ve got 2m to 2.5m phones moving every week.”
Rishi Malhotra, chief executive of streaming service Saavn, is explaining to Music Ally why he sees such promise in India, the market that has driven his company to the point where it has 18 million active users streaming 250m songs a month.
That’s also the promise that persuaded investors to back Saavn with a $100m funding round in July 2015, based on the company’s growth in a competitive market where local rivals include Gaana and Hungama, as well as international players like Apple Music.
“My way of describing India is that it’s beautifully disorganised. There’s a huge volume of people: 1.3 billion, 1.4 billion people, and 700 million SIM cards active there,” says Malhotra.
“And if you look at the stats, in the next three to four years, you’re going to have over 50% of the population in India being under the age of 30. Plus, there’s a huge, rising middle class, and also people are bi and trilingual – and one of those languages is English. And that’s fuelling a lot of these changes.”
39 year-old Malhotra, who is based in the US, remembers visiting India as a child, when technology like video recorders, DVD players and Walkmans would be imported. More recently, the country became an exporter of tech talent to Silicon Valley.
“Now everything is converging to build great companies and great technology in India,” says Malhotra, brandishing an Indian-made Android smartphone that he bought in Bangalore for less than $100.
“It’s thinner than an iPhone, it’s dual-SIM, it’s completely carrier-unlocked, and here’s Saavn running on it playing Major Lazer,” he says. “That’s what’s happening in India.”
Music demand is evolving too. Traditionally, India’s music market has been closely intertwined with the Bollywood film industry. Malhotra notes that soundtracks would often be released 6-8 weeks before a film to help cinemagoers get to know the songs, with radio and television the key platforms for listening.
“What’s changed? First, the access point. In a typical house in India, maybe there’s one or two, maximum three televisions, but you have three generations living in the home. But now there’s this personal access point: the smartphone,” he says.
“Second, international now plays a big part: Taylor Swift, Adele, Coldplay, Nick Jonas, One Direction. Everything that is trending in the US is trending in India the moment it trends. For audiences there, English programming used to be sub-1% two years ago. Now it’s approaching 18-19% of our total usage.”
No wonder the big western label groups are interested in India, although Malhotra stresses that the country is far from a three-label market.
“There are 900 labels in India! So we’ve got label diversification and also language diversification: there are 14 languages editorialised in our product. It’s not a simple market to address.”
It’s also a market where some of the same distribution experiments seen in the western world are happening. Freemium service Saavn, for example, has been testing putting albums by Coldplay and Pink Floyd behind its paywall to see whether they drive subscriptions.
“From the labels, it’s a great statement. Music should be valued and it should be paid for. We’ve got to work to figure out the right price point and the right windows, but there’s nothing wrong with that: it’s a great thing for artists and the industry,” says Malhotra.
However, he also offers a spirited defence of ad-supported listening, noting that for Saavn, subscriptions remain not just a minority of users, but also a minority of revenues.
“We are 75% advertising and 25% subscription in our revenues. The opposite of what Spotify might be. Advertising and music have gone together since day one. The first Elvis tour, the first Sinatra tour… and at the scale we are now, advertising is one of the most exciting things we are doing,” he says.
“As a music company, you don’t want to talk about things like click-through rates. It’s not sexy. But it IS sexy! We serve probably 300 different advertising clients right now, all major brands, and we are doing on average a 4.5% click-through rate on their ads. That’s 50 times better than the normal rates.”
Why? Malhotra says that it’s due to the “custom creative” as well as the fact that the ads are served up by context: car ads within driving playlists, for example.
He also notes Saavn’s launch of ads in the “missed call” format: where listeners can place a call that hangs up before it is answered, but which then sends them a text back.
“It’s native to the market, and emerging markets will be ad-supported for a very long time. We know that. Credit card penetration is low and you’re combating piracy, and there’s nothing wrong with that,” he says.
“When we are streaming music, somebody’s paying for it: either an advertiser, the user themselves, or a subsidy from a carrier data plan. Mad Men is all ad-supported. Seinfeld was ad-supported. Ads support programming: it works!”
Besides striving for more growth in users and revenues, Malhotra is keen to drive up engagement among Saavn’s 18 million listeners – “All of this is a battle for time: how many hours are people spending listening” – while continuing to explore non-music content.
“I want to de-commoditise the fact that you can play and manage your music here. We took the Prime Minister’s radio broadcast live on Saavn, we did some live sports. There’s tentpole audio programming that we’re bringing to the user base. We’ll always lead with music, but we believe in audio programming and original programming,” he says.
“So there’s the engagement piece, going beyond music, and just continuing on building the company as we are. There’s a very good opportunity in this market, but it’s important to stay humble and very aggressive about what we’re doing.”
Malhotra is relishing the prospect of competition with Apple Music, and while acknowledging that it makes for a powerful rival, sees no guarantee that it will make a big impact in India, citing the e-commerce industry – where local firm Flipkart is bigger in India than Amazon – as inspiration.
“The phone I showed you is an Android phone. 98% of the phones in India are these. You probably won’t see Apple Music really featured in the Google Play store,” he says.
“As long as Apple Music is married to a thousand-dollar handset, it will have its challenges in India. But the market itself is a big market of entertainment fanatics that are just going digital now. So competition is great.”
“There will probably be domestic consolidation, and some of them sunsetting. And I think you’ll also see big players – big internet players – enter the market.”
Does Saavn have global ambitions of its own? The United Nations recently announced that India has the world’s largest diaspora, with 16 million Indians living elsewhere in the world. Saavn is available globally for that reason, but Malhotra says the company’s strategy has shifted on this front.
“One of the mistakes we made in the past was that a few years ago, we were focused on way too many markets at the same time. If you target the diaspora as well as India, you just can’t take root properly in any one market,” he says.
“Two years ago, we said look, we have this diaspora audience so let’s take global rights to Indian content. But let’s just be India’s streaming service: the biggest tree that grows there around the digital ecosystem. And the diaspora will fall into place.”
“Largely, that’s what’s happened. We are building our Indian user base and engagement, and that is just connecting the diaspora naturally. We are fully focused on India: that’s our market.”
Malhotra sees plenty more growth in the increasingly-digital, increasingly-millennial India for the music industry, and for Saavn.
“We’re doing four times the amount of streams on a monthly basis than we were doing two years ago, but this is still just the beginning,” he says.
“If you want to find the next 500 million users, you’re not going to find them in the US or UK. You’re definitely going to find them in India. It’s very important to a lot of people.”