Categories: NEWS
By Published On: 8 months ago

Spotify, the Global Music Giant, Struggles to Make Its Mark in South Korea

Despite being the world’s top music streaming platform, Spotify has faced significant challenges since entering the South Korean market 2 years and 6 months ago. Its presence has yet to match its global dominance, facing stiff competition from local platforms.

Spotify, which originated in Sweden in 2006, is often referred to as the “Netflix of music” and operates in over 180 countries worldwide. It made its debut in South Korea on February 2, 2021.

According to industry sources on the 4th, domestic music streaming is currently dominated by Melon and YouTube Music. A recent analysis of music app usage behavior by Korean Click for the month of July revealed that Melon had the highest number of users at 5.06 million, followed by YouTube Music (4.22 million), Genie Music (2.31 million), FLO (2.22 million), and Naver Vibe (1.15 million). In contrast, Spotify, the global leader, ranked sixth in South Korea with 520,000 users.

Spotify has also faced challenges from local telecom companies. LG Uplus, one of the early supporters of Spotify’s entry into the Korean market in August 2021, promoting it as “bringing over 70 million songs worldwide to LG Uplus mobile services,” terminated Spotify Premium’s additional services as of March 15 this year.

The optimistic outlook of causing a major shift in the stagnant domestic music service market has disappeared within just a year and six months. In comparison to Spotify’s global prominence, this situation in South Korea is notably underwhelming.

According to The Hollywood Reporter, Spotify recorded its highest-ever monthly active user count of 551 million worldwide at the end of June this year. Among them, there are over 220 million paid subscribers.

In the global market, Spotify’s paid subscriber base has a significant lead over the second-place Apple Music. According to the market research firm MIDiA, as of the first half of last year, Spotify held approximately 30% of the global music streaming market (with 1.878 billion subscribers), while Apple Music lagged behind with 13.7% (847 million subscribers). Following them were Tencent Music (13.4%), Amazon Music (13.3%), and YouTube Music (8.9%).

One of the factors contributing to Spotify’s appeal is its access to over 4 billion playlists. While domestic music streaming platforms also offer playlists, Spotify’s playlists are considered unmatched in terms of the number of curated tracks and genres. Spotify boasts a library of over 1 billion songs.

Spotify also wields direct influence on the U.S. Billboard and the UK charts. Even before its entry into South Korea, it gained popularity among users who wanted to listen to music not released domestically.

Various interpretations surround Spotify’s performance in South Korea, given its competitive strengths.

Firstly, South Korea is home to multiple music streaming services operated by leading ICT companies like Melon (Kakao), Bugs (NHN), FLO (SK Telecom), Vibe (Naver), and Genie Music (KT). These platforms offer discounts and benefits linked to their respective services, attracting consumers. For instance, LG Uplus, after parting ways with Spotify, immediately started offering music streaming services through Vibe.

This situation mirrors the experience of Apple Music, which entered South Korea in 2016, unable to establish a significant presence before local competitors. Both global giants have struggled to break into the Korean market.

Additionally, the uniqueness of the music streaming market is a consideration. This market is characterized by a lack of differentiation, as most platforms offer similar music libraries. As a result, the majority of demand gravitates toward a select few tracks. The oversaturation of the domestic music streaming platform market has led to this diagnosis.

The rapid growth of YouTube and YouTube Music is another challenge for Spotify. Google has swiftly dominated the domestic music distribution market by bundling YouTube Music with its YouTube Premium service.

While there were no significant changes in the domestic music streaming market until 2020, YouTube Music disrupted the status quo. Starting in September 2020, bundling YouTube Music with YouTube Premium proved effective. Observers note that consumers have been opting for YouTube Premium at 14,500 KRW per month, which includes YouTube Music, instead of directly subscribing to YouTube Music at 8,690 KRW per month.

Furthermore, Spotify’s overall financial situation has been questioned, as it continues to report losses. Spotify announced plans in January to lay off 6% of its employees due to internal uncertainties.

Around 70% of Spotify’s total revenue goes to royalties for music creators. To overcome its low music revenue, Spotify has made excessive investments in supplementary businesses like podcasts and audiobooks, which have shaken its finances and ultimately led to a failure to maintain its growth rate.

This situation has inadvertently benefited competing platforms. According to Statistics, the number of paid users for YouTube Music, which stood at around 18 million in 2019, increased to over 80 million last year. During the same period, Apple Music also doubled its subscriber count from 68 million to nearly 180 million.