Emerging Music Markets: Russia And Mobile Music
By Eric de Fontenay (Founder & Publisher) [02-08-2009]
Music industry professionals may not think of Russia as a high-growth market for international expansion. That oversight though may representative loss opportunities for music companies looking to buck the present recession.
The Russian music industry made it's presence felt at this year's MIDEM as the spotlight country, and for good reason. Outside of Germany, Russia represents the largest internet population in Europe with 40 million surfers. Add to that fact that it is the 4th largest mobile market (after China, U.S. and India), with growing physical (10% increase in 2007) and digital sales, and the allure of the market for music companies worldwide is clear. "Russia is in a phase of rapid expansion and on its way to becoming a major player and an essential partner for the rest of the industry," noted MIDEM director Dominique Leguern.
Cornwall-based independent record label Aardvark Records is one of the companies taking full advantage of this emerging market's possibilities as it announced an agreement with Russian mobile content and service provider United Fun Traders (UFT). This is a great opportunity for anyone who uses their mobile to access anything such as Facebook, and happens to be a fan of music put out into the market by Aardvark. UFT, which supplies one of the biggest Russian mobile operators with music content, has licensed over 700 songs from the label's catalogue, including songs from dance acts Yahel and the gold-selling EricM, rock act Little Spitfire, singer-songwriter Everett Young and folk acts such as Steve O' Connor, Satya Graha and Moondragon.
"With a market of that size, everything is to play for," noted Aardvark Records director, Alex di Savoia on the label's practical expectations from the deal. "Conservative sales estimates from UFT will see a significant impact on our net sales revenue.
Russian dance music fans are already familiar with some of the artists on our label; namely Yahel, DJ Front and Zetan Spore. With the strength of sales, we're anticipating being in a position where more of our artists can begin touring Russia."
DJ Yahel Sherman
Best known for the chart topping dance and electronica acts from its sub-label Aardvark Dance, Aardvark Records is already well positioned to capitalize on this new market. It's website's eastern European footprint already accounts for 28% of unique daily visitors, with 17% of that traffic coming from Russia.
"Dance music is exceedingly popular in Russia. The clubbing scene in the major Russian cities continues to go from strength to strength. On the whole, Russians would appear to be very net savvy; they know how to find what they want. Russians also tend to be trend leaders rather than trend followers. That's how we've built up a Russian fanbase for the label and our artists. This has led to fan growth via word of mouth.
"Aardvark had looked into selling in the Russian marketplace over the past four years. There were problems with distribution in the form of outrageously high import duty tariffs. As imports, only the affluent could have ever afforded to buy our releases.
"In addition, until now we couldn't supply our releases to the Russian market in Rubles. This made our artists' releases expensive for the average Russian consumer to purchase. This deal will see our releases competitively priced alongside domestically produced Russian artists.
"And then there was, and is, the issue of piracy. Music piracy in Russia has been a problem which cooled our enthusiasm. UFT's platform allays those concerns."
Aardvark Records director, Alex di Savoia
While most U.S. companies and labels focus on social networks and online retail, much of the rest of the world is driven by mobile, particularly in emerging markets where access to broadband is less than ubiquitous. According to market research firm eMarketer, worldwide mobile music retail revenues will grow from $2.4 billion in 2007 to over $13 billion by 2012. And even in developed markets such as Japan, mobile music accounted for 92% of all digital music sales of �75.5 billion ($641 million) in 2007 as reported by the Recording Industry Association of Japan (RIAJ).
Russia will have 188.5 million subscribers by 2010, making it one of the largest mobile markets in Europe according to Wireless Federation. In the same report, in two years the mobile phone market penetration rate is also expected to increase by 6.3 percent from 2008 to 134.6 percent.
"Mobile features largely in our growth projections. Mobile downloads, ringtones and ringback tones allow us to penetrate new territories relatively easily. For instance, after the launch of our catalogue in Russia, UFT will also be selling our mobile catalogue in Asia Pacific, Europe and Latin America. We're also in the midst of negotiating licensing terms with one of the Middle East's largest mobile content providers. These are regions where mobile content is very popular and part of everyday life. So we're quite optimistic about our sales performance in these territories.
"In terms of the US, demand for mobile content is growing. Our mobile catalogue is already available in the States. As the demand continues to grow, we expect our US mobile sales to significantly improve."
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