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Niche player Deezer goes local to take on streaming giant Spotify


From Brazilian gospel to Puerto Rican reggaeton and Dutch hip-hop, music streaming company Deezer is scouring the globe for gaps in the market where it can survive and thrive against Spotify and Apple.

The French firm has little hope of success going toe-to-toe with its far bigger rivals in the mass-market realms inhabited by the likes of Taylor Swift.

Instead it is focusing on local music genres in fast-growing, often non-English language markets, areas where it believes it can steal a march. It is targeting local listeners while also looking to position itself for a global audience as a "cool", non-mainstream alternative.

As part of its Deezer Next strategy it is dispatching local teams of 'editors' to identify talent in niche genres and create original content, Netflix-style. The aim is not only to differentiate its catalogue but also to reduce its reliance on the record labels that take the lion's share of streaming services' revenue. It has 40 editors and is looking to recruit more.

Deezer CEO Hans-Holger Albrecht said he would target selected markets in Latin America, Asia and Africa where Spotify was not already predominant. They include Guatemala, Bolivia, Paraguay, Colombia, Nigeria, Senegal and South Africa.

"I strongly believe in the localisation of content," he told Reuters.

"While Spotify is mainly playlist-focused, we are betting on local differentiation, and this has helped us become number one in gospel in Brazil."

It has a similar 'freemium' to market leader Spotify, offering advert-supported free access and charging $10 a month for the full service. However it has only 12 million users - 9 million paying - compared with Spotify's 60 million paying subscribers, and brings in just a tenth of the Swedish firm's $3bn annual revenue.

Deezer, controlled by billionaire Len Blavatnik, is sinking tens of millions of euro into the project in a gamble that music streaming will continue to grow rapidly to eventually eclipse all other forms of music listening.

The paid streaming market is expected to grow to $28bn a year by 2030, according to Goldman Sachs

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Spotify is loss-making but nevertheless valued at $13bn. The millennial megabrand, is eyeing a stock market listing and Albrecht said Deezer could also consider going public should that flotation prove successful.

Deezer users listen to an average of 30-60 hours of music per month, a sevenfold increase from two years ago, said Albrecht. It is the leader in its home market of France where it has been profitable for nearly five years.

It is the fourth-biggest music streaming company in the world, by paid users, after Spotify, Apple Music and Amazon. The latter two, have the advantage of being able to rack up losses on streaming while the market grows and recoup the money from bumper sales of phones and tablets. Scale is the biggest challenge to Deezer and fellow minnows Tidal, backed by rapper Jay-Z, and Berlin-based SoundCloud, which recently came close to bankruptcy.

A spokesman for Blavatnik, who was born in the former Soviet Union and is now a US and British citizen, said his policy was not to comment on existing investments.

Mark Mulligan, an analyst with technology research company MIDIA, said the fact the tycoon also controlled major music label Warner Music and other industry assets threw up interesting possibilities."

"Blavatnik has a card to play," he added. "An efficient way to compete against integrated tech giants like Apple and Amazon would be to combine Deezer, Warner Music and all the other concert and artists management firms he owns to build a full-stack music powerhouse." (Reuters)

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