Sony Music’s New Office in Africa Signals a Promising Near-Future for the Continent – Billboard

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Sony Music announced last week that it is opening an office in Lagos, Nigeria, the first step towards establishing a footprint in a West African market that Adam Granite, Sony’s president of Northern/Eastern Europe & Africa, claims has huge growth potential.

“West Africa has a population of 340 million, and Nigeria alone has 150 million of that. It’s a very big country that has historically had a very large music market,” Granite said. In the ’70s, the nation had one of the largest music markets in the world, but piracy (analog then, digital now) has ravaged the music business, a situation Granite says is beginning to turn around, thanks to the expansion of the mobile market in region.

Sony and other majors haven’t traditionally had much, if any, market share in Africa. Until recently, the only way for most consumers to hear their product was either on the radio or through piracy. That’s one reason why Sony is in “very active discussions” with the Johannesburg-based mobile giant MTN Group’s Music+ streaming and download service, which will offer content to the service’s 2.5 million subscribers.

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Rotimi Fawole, the head of business development for the four-year-old Africa-centric streaming and downloading service Spinlet, tells Billboard he is excited to have a major company in the country. “We expect that their efforts and promotions will lead to higher standards locally, not just with music production but also things like reporting, metadata, artist management, et cetera,” Fawole says. “Hopefully, they will set examples for local music companies to follow and the local industry should be the better for it in the long run.”

Fawole estimates that Internet penetration hovers around 38 percent in Nigeria, with smartphone penetration behind, at around 30 percent. The high price of smartphones and the cost and reliability of bandwidth are still issues, but Fawole pegs his country as one of the world’s fastest-growing smartphone markets. Ninety-three percent of Internet users access the web through their phones.

Wifi availability and smartphone adoption in Nigeria remain modest, but Granite says MTN is working feverishly to build out the infrastructure for 2G and 3G networks, which could bring more major players into the fold just behind Sony’s entry in the hopes of riding a “big and growing” wave of new consumers.

To that end, the recently launched download store MusikBi, which takes as its mission the proper payment of artists and battling piracy, plans to distribute songs via SMS and PayPal, which could result in rights holders keeping up to 60 percent of the income from sales.The Dakar, Senegal-based service has drawn more than 200 musicians including superstars like Youssou N’Dour and Baaba Maal, whose songs will cost somewhere between $0.50-85 a piece, according to The Guardian. At present, MusikBi does not have plans to offer streaming services because of the slow nature of Internet connections in the largely mobile-driven market. A number of other download and streaming services are already up and running in Nigeria (including Orin, Las Gidi Tunes and Fawole’s Spinlet.

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Sony has also struck a licensing deal with the three-year-old pan-African mobile streaming service Kleek, which is backed by Universal Music and Samsung. Granite says more joint ventures could be on the horizon. “We’re open to trying to help nascent services expand on the continent, and we see a big opportunity for someone to go after a focused music service with a great pre-paid solution,” he says, referencing the reality of pre-paid cellulars’ dominance on the continent over monthly payment plans due to a limited use of credit cards. Current plans don’t include Sony launching a stand-alone streaming or download service.

Fawole says Spinlet has had a number of conversations with all the major labels and that discussions are ongoing, but that content licensing is still a sticky issue because of the “varying level of maturity” of intellectual property enforcement in the region.

“It’s the early days of smartphones, and some countries are still dealing with basic issues relating to access to power, but we think in the long term there’s a big opportunity,” says Granite of the Sub-Saharan market’s potential, with its 800-million-plus population. One of the first barriers to overcome is the one that Fawole alluded to, the “very challenging” issue of copyright enforcement which, until recently, has been essentially non-existent.

“Historically Nigerian music was focused on the live business as the only way to secure income,” Granite says. “Recorded music was thought of as promotional… with artists going to a local manufacturer and selling them the album for a one-time payment and then going down the street and selling it to someone else. Everyone knew they had a limited exclusivity window and the quality of CDs was very poor. Music publishing was something a lot of artists never thought about.”

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Acknowledging that it is “not inexpensive” to do business in that part of the world, Granite declined to discuss Sony’s upfront investment in Lagos, but described it as “significant.” So far, Sony is keeping its strategy pragmatic with modest staffing in the largest Nigerian city, headed by general manager Michael Ugwu, who knows the local market well and will handle business development and A&R. Sony is also currently in the hiring phase in a wind-up to opening offices in Nairobi and Kenya.

The Sony announcement came nearly in parallel with Live Nation announcing its purchase of South Africa’s largest concert promoter, Big Concerts. LN president of International and Emerging Markets Alan Ridgeway says that Sony’s Lagos move is “encouraging, in that it will help develop the business there and demand for artists to go through there.” While LN is focused on South Africa for now, depending on the strength of Sony’s investment and its payoff, Ridgeway said LN will “absolutely” look into expansion into other markets, which could include Nigeria and Angola.

Another factor helping spur multinationals having a second look at Nigeria is that the country overtook South Africa as the continent’s largest economy in 2014 and, Fawole noted, has settled into a relatively stable democracy after years of military rule. To streamline the business in their new market, Granite’s team in Lagos will be working with Sony/ATV to secure publishing rights, as well as teach artists about forming effective local performance societies. On the positive side, though fans have gotten used to free, pirated music, he said mobile is expanding much faster than home broadband penetration. “It’s much harder to steal music on a mobile device than on a home computer.”

A 2015 IFPI report points to the continent having more than one billion mobile subscriptions by the end of this year. An economic slowdown and dropping currency rates haven’t deterred investors, including Universal, which last year announced its own five-year plan to expand into the market.

“[The economic uncertainty] doesn’t factor into what we’re doing, because it’s a long-term, strategic initiative and currency will go up and down,” Granite said. “For us it’s about developing in the region and on the continent and finding artists we can sell there.”

Sony Music’s New Office in Africa Signals a Promising Near-Future for the Continent – Billboard