Sachetization in the Music Business

To an extent, we’ve become relatively familiar with sachetization of Fast-moving Consumer Goods (FMCG) - given the interesting turn Nigeria’s economy has taken over the years.

We’ve seen the repackaging of products like Dettol, Hollandia, Morning Fresh and most interestingly Baileys, into smaller bits for affordability. Now, something you’re probably ruminating on already could be “how can music consumption be sachetized, given that it’s not a tangible product?”

Interestingly, sachetization of music consumption is barely a new phenomenon. In some regions, DSPs have not only beaten down their prices to be competitive with local players, they’ve also improvised and tailored their offering to appeal more to local realities. This is however more common in regions with relatively lower Average Revenue Per User (ARPU). The primary intent here is for their platform to reach, be more attractive and affordable to more people - as market share is critical to their long-term strategy. And with this ensuing battle for market share retention, sachetization is one of the ways DSPs like Spotify are looking to edge their contemporaries, despite its overall ARPU dropping 8.8% in 2020. This is because subscription revenue keeps declining due to packages like family plans, bundles etc. However, instead of lowering subscription prices even more, they’d decided to sachetize their products to cater to a certain set. As we might know, the reasoning behind sachtization is creating something that people can’t normally afford - in smaller dose. More often than not, sachetization is perceived as innovation around poverty.

WHERE IS SACHETIZATION MUSIC CONSUMPTION PRACTICED?

Upon launch, Spotify already lowered its subscription price in India to an equivalent of $1.9 but as that doesn’t seem to cut it, instead of slashing the prices further, they adopted sachetization to grow the number of people that can afford the service. Sachetization in the music business parallels pay-as-you-go in form of passes - where users only pay for short-term access. For instance daily, weekly, per song, per artist, per album etc. It's a relatively fair opportunity to increase the total number of people paying for music. 

India, Thailand are some of the countries where Spotify has deployed the offer for daily, weekly and monthly premium access at a reviewed cost. It is called ‘Premium Mini’ and in Thailand, users can access daily or weekly premium from an equivalent of $0.39 while in India, an equivalent of $0.18 (INR 7) and $0.55 (INR 25) for daily and weekly premium access respectively.

Premium Mini does come with certain restrictions that includes listening only on mobile devices - excluding desktop or web. Also, instead of the 10,000 songs per device on 5 devices download limit of the individual plan, Premium Mini subscribers are limited to just 30 songs on one mobile device.

UduX, a Nigerian streaming company, has in the past months partnered with MTN to roll out this offer to customers. Apart from its standard monthly subscription fee of N500, MTN users can now stream music on UduX with N20 daily, N150 weekly etc.

There’s hardly any data about the use of Spotify in newly-launched regions like Nigeria [yet] but if the fate of FMCGs is something  to go by these past months, let’s see what the future holds for platforms like Spotify and how they intend to navigate the tricky waters.