The Big Three: Web, E-mail, Music

After 6 years of business, the Apple iTunes store has sold over 8 billion songs, or over 75% of worldwide online music sales. An additional 1 billion+ videos were downloaded between 2005 and 2008, and over 1 billion apps have already been purchased. However, these numbers mean little to Africans, who live in a region where the service is virtually non-existent (although it now exists in South Africa). Apple, and other music retailers like Amazon, have good reason – international rights are tricky and most Africans don’t even own computers, iPods, or iPhones. It’s not exactly worth the money to download a high quality audio file onto a public computer and in many rural locales, electricity is unreliable. Additionally, international retailers may not carry the music that Africans want to hear. An African startup company could fill the iTunes-less void, although conquering DRM (digital rights management) is easier said than done.

Either way, given the state of the mobile industry, Africans will use their mobile devices instead of personal computers to store and play music. If the mobile trend pans out, African music lovers may bypass iTunes altogether. Currently, the usefulness of the store mandates either an iPhone or iTunes music software. The iPhone may be popular in South Africa, but the device is by no means king in the majority of Sub-Saharan Africa, where 2.5G and 3G networks are in their infancy. An example of an iTunes replacement is MusicStation. In 2007, Omnifone launched the MusicStation service, which later became available over the Vodacom network in South Africa. Music tracks could be streamed, downloaded to the handset, or downloaded and transfered to a computer. The system worked on Java-based phones, and utilized 2.5G and 3G networks. Costs per track even included the data rate. In the end, operators were more than willing to sign up for the service in fear of revenues otherwise lost to Apple.

In 2008, the Apple app store opened in South Africa. News24 excitedly reported its long-awaited arrival by saying:

With the iPod by all accounts cited as the most popular portable media device in the South African market, it’s safe to assume that all iPod users are also active users of the iTunes software (which allows for content to be synchronised with the portable device). It’s thus a perfect storm – Apple has a captive market and the ability to service it. All it will have to do is sort out the bickering and fighting that generally surrounds the rights to content and ensure that the local rights holders get their share of the revenues. If it can however grapple with the hardball international record labels and Hollywood, we’re convinced the local rights holders won’t ill present even the slightest challenge to Apple’s model.

As usual, South Africa is an outlier from the rest of the continent, and in the case of iTunes, will probably not serve as an example for other nations to follow. However, even when the iPhone launched weeks later, there was no South African iTunes store to provide media content. This is an indicator of the fact that the relationship between Vodacom and Apple remained an arms-length one, and that even the largest customer-carrying company in the country could not bypass the arcane rules of international music licensing. Apart from bandwidth costs, licensing will be the major hurdle for telecoms to clear if they are to coordinate mobile music buying systems.

Current factors limiting online music stores in Africa:

1. iTunes only accepts payment from addresses in certain countries (mostly North America and Europe). Africans have seen this before with PayPal. The solution? Mobile payment systems based on Africa must integrate with a new music retailer startup.
2. The cost of broadband may not justify the additional cost of music. In the United States and Europe, legal music downloading did not emerge until broadband was widely used. Even then, broadband costs were much more affordable than they currently are, or are predicted to be in the next couple of years in Africa. Also, waiting 20 minutes for a song download is not an efficient use of time, especially without unlimited Internet access.
3. In 2007, MyBroadband reported the prices of Apple products as being higher in South African than in the rest of the world. An iPod Shuffle cost 41% more than in America and the iPod Touch was 63% more costly.
4. Smartphones are arriving in Africa, but are limited to developed/urban areas.
5. YouTube. The site provides a vast assortment of streaming music at reasonable bitrates. However, the quality is far from ideal, and saving files is cumbersome and technically illegal.

In the United States, Apple products exploded in popularity during the year 2004, roughly 10 years after the start of the graphical Internet and about 5 years after broadband became readily available. So, by these standards, Africa should see an increased demand for portable audio in about 5 years, considering broadband is arriving right now. Of course, the state of Africa’s general infrastructure could delay the even by another few years. Ultimately, Africa will be able to purchase millions of songs online. The untapped market may seem forgotten, but with the ingenuity of African tech entrepreneurs, investors cannot be far off. It will take the right combination of startup, investor, telecom, and music distributor to create a uniquely African platform. And of course, plenty of interesting African tunes.