In an overcrowded digital music market, Vinod Bhat, chief executive officer and co-founder, Saavn (South Asian Audio Video Network), a popular music streaming service, tells Priyanka Joshi that standing out in a competitive market requires a carefully crafted, balancing act
You didn’t begin as a music streaming service but chose to become one eventually. What made you change direction and why is a dominant position in India critical for the US-based company?
Yes, we didn’t start as a music streaming business but spent the first few years as a third-party licensor of Indian music for the US-focused music services like iTunes, Rhapsody, AT&T and others. It was while we were working with the NRI audiences in these markets that we realised there was a growing demand for Indian, especially Bollywood music closely followed by regional music.
Saavn, as we see it, is an international business. In fact, we grew out of a cable video-on-demand business with operations in the US, UK and Canada but continue to work with partners in Europe, Asia and the Middle East. Our team is acutely aware that we serve an audience that is spread over 200 countries. That said, we are a South Asian music company and it should not come as a surprise that we are aiming to grow our ad revenues in India — it’s our largest market. The Indian market is probably the fastest growing as far as digital consumption is concerned. Take Facebook usage, mobile phones or even internet penetration — Indians are exploring the new platforms eagerly. It made business sense for us to distribute legal music to Indians, across platforms that were being adopted by users.
Why did you tweak the business model and how long did it take for the new model to take off?
In 2006, we saw the untapped opportunity when our friends, who were buying music from Apple’s iTunes store, brought to our attention the lack of Indian content on the store. So by 2009, we started evolving ourselves from being just a media and technology company to a consumer product company.
Once we had built the primary streaming technology (in-house) that we were satisfied with, Saavn launched its first consumer product in mid-2010 with around 1.5 lakh songs. The streaming service attracted a million users in the first six months itself. Since our business is ad-revenue based, every product we launch is backed with advertisements. As long as ads keep coming, the business continues. With our media background, it’s not hard to get advertisers; what is more important is that we create the right products.
In 2010, we launched the Saavn app for Android; it was built 100 per cent in-house. It was a demanding task. Our app allows streaming of hundreds of thousands of tracks in Saavn’s catalogue (over EDGE networks). It may sound simple but to make technology invisible on the user interface is a task where many companies fail.
As we continue to launch mobile apps across platforms, we have seen Android handsets claiming a bigger share in India. We are already seeing about 14,000 Saavn app (Android, iPhone) downloads daily. Nearly two-thirds of our user base is from India and about 20 per cent of the mobile user base is active daily. We expect Indian mobile user base to lead our growth here, which will be led by Android handset users.
Doesn’t this say something about how fast we are growing?
How are you planning to compete with the likes of Hungama and Nokia music that not only have a bigger base in India but also have content libraries that are much bigger than yours? What makes you so sure that you are on the right track?
We understand that music libraries of our competitors in India are bigger than ours at the mom- ent. But that does not mean that they have superior service.
We have invested and worked on streaming technology, user experience and delivery. For instance, Saavn streams dynamic audio bitrate adjustment for better streaming on any connection (EDGE, GPRS, 3G, 4G and Wi-Fi) so that the user experience is not marred when there’s a network switch while streaming content. Our search algorithms are such that users can always find the music they are looking for — via the proprietary phonetic search that capably understands what a user is looking for, disparate spellings notwithstanding. Lastly, you need to also acknowledge that Saavn’s deals with music companies are worldwide, meaning that its music can be accessed from any country worldwide. We roll out updates to our apps almost regularly so that the user is never overwhelmed by the app’s design, or technology at the backend.
In India, we haven’t partnered with any telecom operator (Nokia, for example, distributes its music content) but we are focusing on growing the customer base substantially for now.
Come to think of it, this market is heading towards the 100 million mark and it’s extremely critical that we corner our share of customers.
We are quite confident that the advertising revenues will be enough to cover the costs of content acquisition and make profits for the company.
How do you ensure that Saavn’s business model, which banks on ad revenues made by streaming content to the 950+ million telecom subscribers in India, will prevail especially when other handset vendors, big and small, have started pre-loading their music apps with the ability to download music on handsets?
Saavn makes money from purely ad revenues against streams of licensed content. Brands like Hyundai, Pantene, Lay’s, Pepsi, Domino’s Pizza among others are our advertising partners. Since we don’t earn revenues from the user, it has become increasingly important to us to innovate better and give each advertiser value for money. Pick up any industry report and you will see the major influx of ad dollars on to the digital platform looking for a scalable way to engage consumers. Thus it becomes necessary for us to innovate on the ad formats that will work on the mobile as well as the web. Most brands in India today know that they can’t market today without being included the digital world.
We have brought in various ad formats. For instance, the advertiser can use the music player’s skin for branding; they can use the mobile app’s landing page for advertising etc. Besides, brands advertising on Saavn — both on the web and on the mobile through the apps — also get an extended reach to sister properties like SmasHits.com and Saavn’s YouTube channel.
In India we have adopted the practice of working with an advertiser a day limiting ourselves to just 30 advertisers each month. This means on any given day there will be ads, promotional messages etc. from just one advertiser. This translates into good user experience as well as effective advertising approach for brands. To help advertisers reach its target audience, we have developed tools for our apps that serve ads based on gender, location, interests, lifestyle etc. That said, we also have different ad styles that are served to our iPhone app customers (because they own superior hardware, bigger screen handsets etc) and customised ad formats for users with Java or Android handsets. This way, we maintain higher customer engagement levels. In fact, we have clocked engagement rates of up to 19 per cent for our mobile apps, which is way higher than any of our competition.
We are also probably the first ones to roll out audio ads that users hear on their devices instead of bombarding them with video or text ads.
Are there any unexplored frontiers for the digital music and content business like yours in India that remains to be tested for its revenue and operational worthiness?
There are always unexplored frontiers. That’s what excites us and keeps us in this business. For example, no one had really developed a targeted advertising solution like ours for Indian brands looking to reach and engage passionate music listeners. Today, we are the only company that serves dynamic audio ads on the web and the mobile.
Saavn will also pursue partnerships with device makers and operating systems in addition to its existing Facebook partnership to allow us to penetrate the user segments in the country. There are apps in the pipeline for Symbian, BlackBerry, and Windows Mobile too.
Many big companies in India are starting to realise the potential of digital music and content services to help them target their ads and messages to passionate, engaged users. Earlier, brands and agencies stayed away from the internet because of piracy. So much is changing at a rapid pace in India — we are especially looking forward to the growing presence of smartphones in the country and all the challenges that it will bring.