SINGAPORE: Asian providers could lead the world in successful monetisation of music streaming business models, as they work with a range of partners, including advertisers to develop effective and targeted marketing, a new report has said.

In The beat of progress: The rise of music streaming in Asia, consulting firm McKinsey noted that the number of digital music users in the region is growing at around 15% a year, driven by a combination of a generation of digital natives, improved connectivity and increased smartphone penetration.

"Innovations in the digital ecosystem and corresponding changes in consumers' online behaviours have allowed digital music providers to considerably improve users' experience," it said.

Localisation is one important development, as providers have become adept at curating content suited to local tastes and even segmenting it within national boundaries when appropriate.

In Malaysia, for example, music tastes frequently depend on the primary language of the user, so JOOX offers separate and unique user interfaces for Chinese, English, and Malay speakers.

Asian providers have also worked on the social side which is particularly important in the region, with users incentivised to share songs in return for free access to premium features for a limited period.

All this activity is encouraging more brands to look at utilising music streaming services in their marketing. In-app advertising, branding of playlists, the sale of premium subscriptions to partners, and co-branding of offline events are some of the approaches being explored.

Music streaming advertising rates, however, as measured by effective cost per 1,000 impressions (eCPM), remain low in Asian markets relative to other markets at a similar development level, the report said, speculating that advertisers have yet to realise or take advantage of the opportunities offered by digital music marketing.

But, it added, the volume of data available now enables much improved targeting that goes beyond simple demographics, to include moods and activities, while also allowing contextual delivery of advertising.

Co-branded campaigns and co-branded promotion of live events offer further opportunities for advertisers to reach and engage young consumers, while partnerships are being extended beyond telcos to include e-commerce businesses and airlines.

Given the low penetration of debit and credit cards in some markets, the region is also opening up new payment methods for subscribers.

"Players in the Asian market could be trailblazers in the development of innovative music streaming business models," the report concluded. "Their success could redefine how music is consumed and monetised the world over."

Data sourced from McKinsey; additional content by Warc staff