[credit provider=”Flickr user Lorena Biret” url=”http://www.flickr.com/photos/lorenabiret/5432236827/”]
Deezer is a free music streaming platform with over 10 million registered users, which is huge considering that it’s mostly available in France.After many years perpetually in the red, the company now seems on the cusp of profitability. That’s unusual for music startups, to say the least, so we thought we’d take a closer look.
French blog OWNI has a long writeup on how Deezer came back from the edge and here’s what we learned:
- Deezer went freemium. Deezer was free for most of its life, trying to make money from advertising, but eventually caved to demands from the labels and put in a paid option, which at first wasn’t popular at all.
- Partnering with ISPs was the key. Deezer at first only got 15,000 paying accounts out of a hoped-for 100,000 until they partnered with Orange, the biggest ISP in France, which bundled Deezer Premium with its internet subscription packages (and took a big slug of equity for its troubles). This is also reportedly a big way that Spotify drives up premium subscriptions. It makes sense: you’re already paying for your ISP, they already have your payment info, so it’s a much more frictionless thing. Paying accounts surged, delivering tons of revenue. Of course, Orange takes a cut of each sale, but it still multiplied Deezer’s revenue.
- Diversifying also helps. Deezer started Deezer Media, an ad network. SoundDeezer, a service that does in-store music for big brands like McDonald’s France. Apparently this is a 2-3 million euro revenue business for them, in a line of work where every penny counts. Deezer also has a pretty big online shop for merchandise, and is producing more and more of its own content so it has more royalty-free inventory to sell ads against.
These rules seem good for any business, but perhaps particularly for the digital music business: try to have paying customers, great downstream sales partners, and diversify.
Perhaps this is something that services like Pandora, which is going public this year and yet still isn’t profitable, could learn from.
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