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ByteDance's Resso Stirs Up Competition in Music Steaming Space

Aniruddha Ganguly

Competition in the music streaming space, currently dominated by the likes of Spotify SPOT and Apple AAPL, is set to increase as Tik Tok-owner ByteDance enters the market with a new paid-music app, Resso.

ByteDance has already launched the app in India and Indonesia, where Tik Tok is massively popular. According to Sensor Tower data, cited by Bloomberg, Resso has been installed by almost 27,000 users in the past six months since its launch.

Music Streaming Growth Prospects Aplenty

ByteDance, currently one of the most valued startups in the world, is joining the likes of Amazon AMZN, Alphabet’s GOOGL Google, Deezer, iHeartMedia and SiriusXM in the rapidly growing music streaming space (subscription as well as Ad-based).

Per Statista, the music streaming market is expected to generate revenues of $11.11 billion in 2019. The figure is expected to rise to $13.1 billion at a CAGR of 4.1% between 2019 and 2023. Further, user penetration for 2019 is pegged at 14.7%, which is likely to be 15.3% by 2023.

Innovative Features, Tik Tok’s Popularity — Key Drivers

Resso’s innovative features (it displays lyrics real-time) and a more customer-centric approach (allows users post comments under individual songs) are expected to boost adoption rate.

Moreover, pricing-wise, the app costs $1.70 (INR 119 on the iOS App Store) in India, similar to what Spotify charges. ByteDance is expected to keep Resso’s pricing competitive to expand its footprint in price-sensitive countries of the Asia-Pacific.

Additionally, Tik Tok’s growing popularity worldwide is expected to provide an impetus to Resso. Notably, Tik Tok is the third most downloaded non-gaming app of 2019, trailing Facebook FB-owned Whatsapp and Messenger.

Tik Tok is also expanding footprint in the United States as the new user base increased 38% year over year to 11.6 million in the third quarter.

However, lack of licensing rights from music companies like Warner Music Group, Universal Music Group and Sony Music Entertainment can drag down ByteDance’s global expansion plans. Additionally, the ongoing review of the security risks associated with Tik Tok by the Committee on Foreign Investment in the United States (CFIUS) is a headwind.

Spotify Dominates Music Streaming Space, Apple Trails

Spotify is benefiting from premium subscriber growth. Its solid focus on the personalization of playlists enhances the music experience for users. Moreover, robust playlists are helping the company rapidly convert free listeners to paid subscribers.

Additionally, Spotify, which carries a Zacks Rank #2 (Buy), is benefiting from the synchronization of its music streaming service with Google smart speakers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Year-to-Date Performance

 


Reportedly, Spotify has 248 million monthly active users, including both paid subscribers and those who avail the service for free. Further, the user base is expected between 255 million and 270 million in the current quarter.

Meanwhile, Apple has been gaining steam in the music streaming space with the expanding Apple Music subscriber base, currently consisting of more than 60 million paid subscribers.

Further, its availability on Google Play is a major positive. Apple Music’s availability on Amazon Echo devices is expected to expand the iPhone maker’s footprint further in the music streaming space. Additionally, the company is gaining from its tie-up with Verizon.

Notably, Apple, which carries a Zacks Rank #3 (Hold), has no free version of Apple Music.

Amazon & Google’s Initiatives Hard to Ignore

Amazon, another Zacks Rank #3 stock, is keeping no stone unturned to bolster presence in the global music streaming service space. The company’s launch of an ad-supported free version of Amazon Music on iPhone, Android and Fire TV is a testament to the same. Notably, previously Amazon Music was available for free only on Echo speakers.

Apart from free music service, Amazon also launched a new version of its music streaming service based on High Definition (HD) music quality, called Amazon Music HD.

Moreover, Google’s on-demand music streaming service, YouTube Music, is driving momentum in the market by leveraging the popularity of YouTube and infusing the ML technology. Notably, the service is currently available in 77 countries, bolstering its presence in the global music streaming space.

Further, in terms of free music, this Zacks Rank #3 company recently launched a free version of its music streaming service. However, the version is still limited only to Google Home speakers.

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