Brazil - A top performing market
Brazil continues to be one of the top performing global markets for recorded music. The industry works with a wide range of revenue streams including physical sales, mobile personalisation products, subscription services, video streaming and download sales. The market increased in value overall by 2.0 per cent in 2014 to US$246 million, with digital growth of 30.4 per cent more than offsetting the continuing decline in physical format sales (-15.5%). This meant that Brazil was the ninth largest market for recorded music worldwide.
Subscription services revenue rose 22.1 per cent. In January 2015, research from Opinion Box on behalf of the Committee of Digital Music Development estimated some 28.2 per cent of Brazilians were accessing music on such services. Partnerships with telcos are a key strategy to get subscription services to a mass audience. Deezer and Napster, two of the large international services, have signed deals with leading telcos TIM and Vivo. Rdio has partnered with media conglomerate Grupo Bandeirantes. Napster’s partnership will see prepaid customers, who represent 70 per cent of the market, pay three reais (US$1) a week for Napster’s service. Universal Music Group has partnered with Bradesco, a leading bank, to launch Bradesco Music, a streaming service that will cost 4.90 reais (US$1.55) and offers access to half a million tracks and 50,000 video clips from the record company.
Marcelo Soares, president of independent record company Som Livre, says that streaming services are growing strongly, delivering his label more revenue than downloads in 2014. “Subscription is helping drive the whole market up. All of the big players are here and are marketing their services. Before streaming the only options for digital consumption for most people were YouTube or pirate services.”
Alfonso Perez Soto, senior vice president, business development emerging markets & Latam, Warner Music Group, adds: “Since the launch of Deezer, Napster and Spotify in Brazil we’ve seen an impressive level of uptake in subscription. This has helped to boost streaming revenue and is important growth for the market. For that to continue, I think we will see a mix of bundled deals and standalone subscription offerings over the next few years.”
The repertoire played on subscription services has tended to skew towards international repertoire, a reverse of the trend seen in physical sales, but the services are improving their range and curation of local repertoire. Alexandre Schiavo, president, Sony Music Entertainment, Brazil, says: “Subscription services are investing in producing playlists of local repertoire as they move from addressing early adopters to the mass market. We think there is still a lot of potential for expansion over the next few years.”
Download sales increased by 11.7 per cent in 2014, but only account for 28 per cent of the digital market. Download sales have never reached their full potential in Brazil because the main player in the market, iTunes, has only been available in US currency, and with no gift card option available.
Mobile personalisation products have remained strong in Brazil, unlike in many other markets, increasing by 11.8 per cent in 2014 and accounting for 19 per cent of the digital market. The price point of ringback tones at around three reais per month remains particularly attractive to lower income consumers and they are available through operating services so are not affected by the shift from feature phones to smartphones. Video streaming is popular, with ad-supported services growing their revenues by 77.7 per cent in 2014. Around a third of music consumption on YouTube takes place on mobile devices and the platform is looking to improve its monetisation of mobile consumption.
Brands are also looking to cash in on the success of Brazilian repertoire. Alejandro Duque, vice president business development and digital, Universal Music Group, says: “There are lots of innovative models, with brands interested in the streaming market and working with record companies to develop playlisting strategies to help them reach young, affluent early adopter consumers.”