by Andrea Boetti
Spending on smartphone content is shifting away from Northern and Western markets and heading South and East. Emerging markets will soon exceed the US and Europe in smartphone ownership and as a result, most people looking for entertainment on their mobile devices are also located beyond the mature economies.
Yet many of the big digital content distribution platforms like Pandora and Netflix are not available in countries like Brazil, Turkey and India (Spotify just recentlyÂ entered Brazil). Why is that?
The easy answer is legal rights: music, e-books and videos are usually licensed on a country-by-country basis, and even large platforms need time to expand their business to new markets.
Unlike mobile apps where the content creator is also the distributor most of the time, digital content has a much more complicated distribution process behind it. This problem certainly delays expansion but can be overcome by localization: something completely ignored by most digital content merchants.
The assumption for platform owners and content distributors is that people want to consume the content they have obtained rights to: Western pop music owned by a few large record labels.
While this may be true in markets with strong cultural US influences, 80 percent of the world does not speak English. Have you heard of artists called Ä°rem Derici, YalÄ±n or Ð‘ÑƒÑ€Ð¸Ñ‚Ð¾? They are artists on top of music charts in Russia and Turkey.
The point here is that often consumers in emerging markets prefer local music. Merchants like Gaana in India and Yala in the Middle-East have proven that providing users access to local music can be profitable as well and increase the number of their users.
Where the money comes from
Another concern holding Western merchants back is the incorrect assumption that there is less or no revenue to be made here. This is reflected in Spotifyâ€™s pricing strategy for different regions as it is pretty obvious users in the Philippines have less money than those in Luxembourg.
Often the monthly subscription model is simply inefficient, or just not enoughÂ to ensure the huge opportunity for user acquisition offered by the emerging markets. To put things into perspective, the average top-up sum for a pre-paid SIM card in India is 10 INR (0.17 USD) and the average balance is 30 INR (0.50 USD).Â
With such low revenue numbers, processing credit card payments becomes unviable to due to fixed fees that are higher than the one-time purchase received from the user. The best way to resolve this is to forget about monthly packages in such markets and transition into daily and weekly billing of users.
From our own payments data, we see that daily access purchases work about four times better than weekly ones â€“ so itâ€™s pretty easy to understand how monthly packages are not an attractive value proposition, except to a tiny share of high-end users.
Reaching users in emerging markets is becoming a critical issue for merchants as services like Popcorn Time are gaining popularity and making illegal consumption of digital content seamless. Before Popcorn Time, finding and consuming torrents was for the â€œtech-savvy.â€ Now, they have become as user-friendly as reading news on the web.
If the user experience is the same, itâ€™s now up to the legal merchants to create a value offer which is attractive even in low-income economies.
Digital content merchants cannot be expected to expand as quickly as mobile apps have â€“ but understanding the need for localization and targeting mass markets with cheaper pricing (rather than high-end users, which has been the case in the West) will help speed up the process and will help to fight the growing threat coming from piracy.