Is WeChat Poised to Overtake Spotify and Revive the Music Industry?

It’s no secret that the music industry in Australia, as it is in the rest of the world, is still struggling to create alternate revenue streams to compensate for almost yearly, double-digit declines in the sales of recorded music. The music industry has depended upon digital sales to help compensate for the loss of physical product sales, and streaming services such as Spotify, MOG, Google, Rdio and Deezer to pick up the slack.

In 2013, Australian digital downloads were roughly the same as in 2012, but subscriptions to streaming services helped produce slight overall market growth. In Italy, France, Norway and Sweden, streaming services are contributing to a pattern of growth. In Australia, industry executives are still concerned that the growth in streaming revenues won’t be enough to match the continuing decline in physical revenues and stagnation of the digital download market.

Luckily for the music industry, an Asian app called WeChat and others like it have the infrastructure and potential to promote serious growth in revenue.

The last six months of 2013 were of great concern to music executives, causing many to fear that a continuation of the pattern will result in a net drop in digital download revenues in 2014. With physical sales continuing to plummet, the music industry is depending on streaming services to keep 2014 from feeling the effects of both digital and physical revenues declining simultaneously.

What Has to Happen for the Music Industry

For the music industry in Australia to prosper, streaming services will have to become a popular mainstream option. The main problem in Australia is that streaming only accounted for 10% of overall sales in 2013, compared to 84% in Norway and 94% in Sweden.

Much of the credit for the success of Sweden and Norway is attributed to streaming services being bundled with such services as cable, satellite, broadband and mobile services. This has brought streaming into the mainstream in those countries and has helped build an expectation of streaming music being built into TV, internet and mobile service.

The US is experimenting with bundling, as Beats is being bundled into AT&T products. However, Australia isn’t seeing this kind of bundling yet.

Good News from Asia?

In Asia, messaging apps such as WeChat, KakaoTalk and LINE are evolving and transitioning from their beginnings as SMS platforms to full service, in-app mobile platforms. If you haven’t heard of WeChat or LINE, let the numbers convince you: both recently passed the 200 million user mark and it only took them two years to do it. For comparison, it took Facebook over five years and Twitter more than seven years.

LINE produced over $209 million AUD in the third quarter of 2013, thanks to messaging “stickers,” while Twitter produced $180 million for the same time period.

Both WeChat and LINE have expanded their offerings to include banking and e-commerce platforms for both digital and physical retail applications. McDonald’s customers in China can pay for their food directly through WeChat. Korean customers of Starbucks and Baskin-Robbins can pay for gift cards with KakaoTalk. Most of the messaging apps also offer their own in-app currency.

So, Why Does This Matter?

This infrastructure appears to be set up perfectly for music. Artists such as Katy Perry and Paul McCartney have already offered paid music stickers within messaging apps, but the “next big thing” in the industry could be direct access to streaming within messaging apps. There are already over a billion messaging apps out there; this represents a huge marketplace for music streaming.

KakaoTalk, available only in Korea for now, and LINE, currently available in Japan, have already started to set up their own paid music services, announcing them recently. While KakaoTalk plans to stay in Korea, LINE plans to offer their service outside of Japan. KakaoTalk focuses on the social aspects of their app, allowing friends to set up “listening rooms” for streaming the music of their choice.

What About Australia?

One thing is for certain: in the internet age, anything that is a success in Asia will soon find its way to Australia and the rest of the world. Messaging apps have been so successful that it is only a matter of time before we see the first one here in Australia.

Why Not You?

Someone has to build the first Australian app that allows for music streaming: why not you? Someone is going to catch lightning in a jar by creating a messaging app that becomes huge. It might as well be you.

Call us at Smarter Apps today. Let’s discuss your ideas on messaging apps or any other app ideas. Call 1300 650 253.

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