Digital Startups, Developing Market Establishing New African Music Industry


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January 15, 2013

Digital Startups, Developing Market Establishing New African Music Industry

After long-term challenges with widespread piracy and a widely disparate radio and record industry, a burgeoning legitimate music scene is fast emerging on the continent of Africa.

An expanding middle class, a fast-growing population with more than 65% under 35 and digital startups helping to leapfrog infrastructure weaknesses are making major African cities emerge as not only sources of great local talent that can go global in a meaningful way, but also markets and venues for U.S. and other global artists touring and selling their music.

“Africa is the last big secret in the music world, and it’s just about to blow up,” says Obi Asika, CEO of Lagos, Nigeria-based media and entertainment company Storm 360. “In South Africa and the associated regions around southern Africa, [the business and music industry infrastructure] are much more structured, more like the West.”

Randall Abrahams, managing director of Universal Music South Africa and sub-Saharan Africa, adds, “The African industry is an extremely exciting and vibrant music marketplace right now.”

Universal, the world’s largest music company, encouraged by its French media and telecoms parent Vivendi, has been keeping an eye on the fast-evolving markets in Africa and is starting to make some moves there.

All of this portends good news — and visions of dollar signs — for a beleaguered industry on the prowl for new revenue resources. Africa is the world’s second-largest and second-most-populated continent with more than 1 billion inhabitants.

With Apple’s iTunes store due to launch in Nigeria, South Africa, Kenya and Ghana in 2013, Abrahams notes that the imminent arrival of such digital platforms aligned with ongoing advances “by continental collection agencies means that the sub-Saharan territory along with other emerging markets is a major source of growth for Universal.”

Other digital services already have a small presence on computers and mobile devices, including French startup Deezer, German mobile music service Simfy and local Nigerian startup Spinlet.

One online standout is, founded in 2011 as a video music management business. It counts 120,000 registered users primarily in Nigeria. The site’s NollywoodLove channel is the No. 1 movie channel globally on YouTube, averaging more than 25 million views per month. The company is currently rolling out a dedicated computer and mobile platform for music downloads and streams using the tag line “Nigerian music anytime anywhere” — representing 400 artists and containing more than 35,000 tracks in its catalog, according to CEO Michael Ugwu.

But the market is still nascent, so Universal, like it did in the United States with Vevo, is leading the launch of a local digital music service called Kleek, according to sources familiar with its plans. The service should launch next year in key African markets South Africa, Nigeria, Ghana, Kenya, Angola and Cameroon. Universal declined to comment on the service.

“It’s tough to measure the African market as there aren’t many territories which quantify physical sales, and digital data collection is in its infancy,” Abrahams says. “One of our key focuses at Universal is to invest in capturing higher levels of consumer/music data . . . We have to continue to develop platforms and content drivers in order to generate consumer interest and engagement.”

A key to developing the market will be establishing not only collection agencies and stronger copyright legislation but also radio and sales measurement systems.

Colin Gayle, a former artist manager and head of international branding for 50 Cent’s G Unit, founded Beyond the Music in 2004 to grow and bridge the music industry space across Africa locally and then move it into the mainstream domestically and internationally. His company — with offices in Nigeria and South Africa — has morphed into Billboard Africa after licensing the Billboard brand. Billboard Africa is in the midst of launching a BDS-type platform in 16 countries in Africa to create a music chart system and provide the data needed to pay performance-right fees for local and international artists.

“The question is how to build a great ecosystem in Africa as well as a robust domestic market — and engage the world with African music content,” Gayle says. “Before, local markets were taking a lot of international content. Now in the last two years, I’ve watched the youth here begin to embrace their own local music and culture, wanting more of it. The opportunities are immense if we can start conversations between North America and Africa and build slowly.”

Already a massive star in his native Nigeria, D’Banj is one of the biggest names in the burgeoning Afrobeats movement. (Photo: Christie Goodwin/Redferns/Getty Images)

A relative newcomer is South Africa-based Warner Music Gallo Africa. The joint venture between Warner Music Group and 87-year-old domestic label Gallo Africa was established in 2006 and is headed by GM Tracy Fraser.

Among Warner’s biggest front-line acts in South Africa are Michael Bublé, Linkin Park, Josh Groban, Bruno Mars, fun. and Green Day. Catalog sales are also key. Warner “works with a number of digital music companies in the region,” Fraser says, identifying a la carte digital download site Look and Listen, such streaming services as Simfy, mobile phone company Nokia and telcos Vodacom and MTN.

The majors are seeking their own breakout artists, which have mainly come from local indies dominated by a mix of Afrobeats hits from Nigeria and Azonto dance tunes out of Ghana. The breakout stars have included D’Banj, Naeto C, Freshlyground (Sony), Bez, Wizkid, 2face and P-Square, whose “Beautiful Onyinye” (featuring Rick Ross) counts 8 million YouTube views.

“Our A&R department is actively involved in developing strong South African offerings,” Universal’s Abrahams says. “We’ve been working with a number of sub-Saharan artists including Bez and P-Square, with a view to both releasing in the South African market and developing young talent for international release.”

The acts are supported by BET International, MTV Base Africa, Channel O, Soundcity and Trace Africa, which have all backed local music rather than acting simply as an outlet for U.S. acts. “In 1999, radio was 70%-80% foreign music, principally American. Today, it’s very hard to hear international music in Lagos,” Storm 360′s Asika says. “Not because it’s not available or acceptable. It’s just that local artists have built up to a level that they’re preferred now.”

Africa’s status in the touring industry for both local and international acts is also on the rise. Artists like Wizkid, D’Banj and P-Square have sold out theaters in London and New York. Meanwhile, Big Concerts, a South African-based touring and promotions company, brought Lady Gaga and Linkin Park to South Africa at the end of 2012 after previous turns with Bon Jovi and Lionel Richie. Another top touring artist is Senegalese-born Akon, who has also signed Wizkid and P-Square to his Konvict label in alliance with Universal Music Group.

“There is a strong appetite for international repertoire and good business is done across a number of genres including pop and urban, which is why acts like fun., Mars and Bublé do so well in South Africa,” Fraser says. “From a touring perspective, there has been steady growth on that circuit. While it’s largely dominated by big names, there are growing opportunities for developing artists. We expect to see growth in certain territories over the next three to five years.”

However, touring still presents logistical and practical challenges, according to Asika. A considerable stumbling block is the prevalence of sponsor-activated shows, which Asika says “makes it very hard to build a tour. If the resident telco has three of the hottest artists in the country and is doing a show for free, how are you going to come back next week and charge people?”

With 176 million subscribers, according to Gayle, Africa MTN is twice the size of AT&T, though it has an average revenue per user at about one-sixth of the U.S. operator. According to local estimates, mobile music sales in Nigeria alone last year amounted to $150 million.

“Africa is one of the world’s fastest-growing mobile markets,” Fraser says. “The rising number of people with mobile handsets, combined with the increasing availability of [third-generation] services, has had a positive impact upon the uptake of digital music services and has become a growth area for the music industry.”

Despite the rosy business potential beckoning in Africa, major obstacles still need to be addressed. Chief among them: piracy, securing government protection of intellectual property, building a sustainable infrastructure to monetize the home markets, increasing assets for investment capital and standardizing rules in regards to performing rights. Currently each country has its own performing rights system.

But things are improving. “Attitudes and business climates are changing,” says Farai Msika, managing director of London-based entertainment firm Friday Arts and Media. “Technological innovations together with rising entrepreneurial efforts in entertainment, finance, partnership, policy and trade are creating a healthy environment in Africa.