April 1, 2023

Smartphones and Tablets Outsell PCs at Lenovo

That milestone, which the company announced Thursday, underlines the growing influence of Chinese companies like Lenovo in the shift from desktop to mobile computing. Now even Lenovo, which acquired the IBM PC business in 2005 and sells ThinkPad notebooks, is remaking itself for a post-PC era.

Lenovo said its sales of smartphones had more than doubled in the three months that ended June 30, to 11.4 million. The company also sold 1.5 million tablet computers.

Executives said Lenovo had benefited from a structural shift in the smartphone business, where the high end, dominated by Apple and Samsung Electronics, is showing signs of saturation. Meanwhile, sales of less expensive handsets made by Lenovo and other Chinese companies, like Huawei and ZTE, are growing more rapidly. “The recent change in the market favors Lenovo and our business model,” Yang Yuanqing, chief executive of Lenovo, said in a conference call with analysts. “The market is shifting from the premium part to the mainstream. It is shifting from the mature markets to the emerging markets.”

Lenovo was the fourth-largest maker of smartphones worldwide in the second quarter, according to IDC, a research firm, with a market share of 4.7 percent, up from 3.1 percent a year earlier.

The company’s smartphone business relies heavily on China, which accounts for about 80 percent of sales, but Lenovo is trying to expand its global presence.

On Thursday, Lenovo executives declined to comment on speculation about a possible bid for BlackBerry, which has put itself up for sale. But Lenovo made it clear that it did not plan to rely on internal, or “organic,” growth alone.

“Given its solid financial position, the group will continue to actively look for inorganic growth opportunities which will supplement its organic growth strategy to accelerate future expansion,” Lenovo said in its latest quarterly earnings report.

Analysts say acquisitions might be one way for Lenovo to address some of the shortcomings of its smartphone arm, including the low prices that its devices fetch — an average of less than $100 in China, while devices like Apple’s iPhone 5 and Samsung’s Galaxy S4 cost more than $700 in that country.

Because of the low prices, Lenovo’s smartphone and tablet arm generated only 14 percent of the company’s revenue in the most recent quarter. The company remains heavily reliant on its PC division for sales and earnings, even though that business is shrinking.

Lenovo has managed the decline better than some of its rivals. Its shipments of computers slipped 1.4 percent in the second quarter, to 12.6 million, compared with a decline of 11 percent in the overall market, according to IDC. As a result, Lenovo overtook Hewlett-Packard and become the world’s largest PC maker in the period. That helped Lenovo post a 23 percent increase in net income, to $174 million, for its financial first quarter, which ended in June. The results were above analysts’ expectations.

Despite the solid performance of the PC division, company executives have taken to calling Lenovo a “PC-plus” company. Mr. Yang stuck with a previous forecast that the company would sell 50 million smartphones and 10 million tablets in the current quarter. But he acknowledged that Lenovo still had work to do in getting out the message about its mobile devices in markets beyond China.

“We still need to invest in the branding, we still need to invest in the channel and network building,” he said.

In China, Lenovo’s mobile business is growing rapidly. Canalys, a research firm, said it had shipped 10.8 million smartphones there in the second quarter, second only to Samsung, with 15.5 million. That is a strong base from which to develop new phones for other price-conscious developing markets, analysts say.

“The whole dynamic favors Lenovo a lot,” said Jenny Lai, an analyst at HSBC. “If you are No. 2 in the largest market in the world, your suppliers will come to you.”

Article source: http://www.nytimes.com/2013/08/16/business/global/smartphones-and-tablets-outsell-pcs-at-lenovo.html?partner=rss&emc=rss

Nokia Sales Continue to Fall

The company, based in Espoo, Finland, on Thursday announced a 24 percent decline in its second-quarter sales, to 5.7 billion euros, though it narrowed its second-quarter losses to 227 million euros, or $298 million, compared with a loss of 1.4 billion euros a year earlier.

The losses were lower than analysts’ estimates, but it is the eighth time in the last 10 quarters that Nokia has reported a net loss. The company saw a glimmer of light in the doubling of sales of its Lumia smartphone line. But Nokia, once the world’s largest cellphone maker, now ranks third behind Samsung and Apple and faces mounting competition from cheap devices made in emerging markets like China and India.

“When you are going through a difficult transition, you have to stay focused,” Nokia’s chief executive, Stephen A. Elop, said in an interview. “It’s hard work, but we’ve got a lot of positive things happening.”

Investors, however, disagreed, sending the company’s share price down 2.7 percent in trading in Europe on Thursday.

While Nokia still remains one of the world’s largest manufacturers of cellphones, the company now relies heavily on its cheaper, low-end models, which are primarily sold in developing economies.

These devices represented almost 88 percent of the 61.1 million handsets that Nokia sold in the second quarter, and have fewer features than high-end smartphones, which are much more profitable to sell. Growing competition from rivals in emerging markets, many of which use Google’s Android software, is eating into Nokia’s earnings.

In total, the company’s non-smartphone division reported a 27 percent drop in the number of units sold, to 53.7 million, compared with the same period last year. The figure is almost half of the total sales that Nokia reported at the end of 2011, and it said on Thursday that it would cut up to 440 additional jobs from the division.

In countries like China, where a growing middle-class population is clamoring for new phones, the number of devices sold by Nokia fell almost 50 percent versus the second quarter of 2012.

“There’s no good news at the lower end of the market,” said Roberta Cozza, a research director at Gartner in London. “The problem is that there are so many local emerging market players looking to build up market share.”

Faced with cutthroat rivals for its cheaper phones, Nokia also is trying to gain traction in the high-end smartphone market through its partnership with Microsoft. The strategy is proving difficult.

Smartphones running Windows software hold less than a 4 percent market share, compared with 74 percent that use the Android operating system, according to Gartner.

Yet, in a sign of some growing customer interest, Nokia reported sales of its Lumia line of smartphones almost doubled to 7.4 million units during the three months through June 30 compared with the same period last year.

The figure represents the largest number of Lumia phones ever sold in a quarter by Nokia since their introduction in 2011Last week, the company announced a new Lumia phone with a camera that has a 41-megapixel sensor.

Analysts welcomed the rising number of Lumia sales. But they raised concerns that the average price of Nokia’s smartphones fell almost 18 percent, to 157 euros, in the second quarter.

“The market would have liked to see more phones sold, but it’s a strong figure for smartphones,” said Janardan Menon, an analyst at Liberum Capital in London. “The more worrying trend is around Nokia’s average phone price. They have to bring that figure up.”

The main cause for the reduction was related to consumers’ continued preference for the company’s less advanced smartphone options, instead of its top-of-the-range devices.

Nokia said that it expected its third-quarter phone sales to outpace those for period just ended.

Article source: http://www.nytimes.com/2013/07/19/technology/nokia-sales-continue-to-fall.html?partner=rss&emc=rss

China Taps a Growing Phone Market

Until then, the global market for smartphones had been defined by the rivalry between Apple and Samsung Electronics. They built expensive phones as must-have products for affluent consumers in wealthy countries.

Now more phones are being designed for consumers in emerging markets, who are expected to account for most of the growth in smartphone sales in the future. That presents an opportunity for the major Chinese phone makers, like Huawei, Lenovo, ZTE, Coolpad, Xiaomi and Oppo.

While Samsung is the biggest smartphone vendor in China, with a market share of 20 percent in the first quarter of 2013, according to the research firm Canalys, several Chinese companies have surged past Apple, which holds 8 percent.

These include internationally recognized names like Huawei, known for network switching gear, and Lenovo, known for ThinkPad laptops, which moved into the No. 3 and No. 4 positions in the first quarter. But there are nearly 400 other little-known makers in China, where two-thirds of the world’s smartphones are made. One of these, Coolpad, leapfrogged from seventh place a year ago to second in the first three months of this year, with a 10 percent share.

“There’s a long tail of local competitors that are going to push Apple and Samsung harder and harder,” said Neil Mawston, an analyst at Strategy Analytics. “There’s a million and one people trying to eat their lunch.”

Chinese phone shoppers are concerned about price because most phones are sold without subsidies from network operators. In the United States and Europe, the wide use of subsidies masks what consumers pay for phones.

The Chinese also switch phones far more often than their counterparts in the West — generally after about six months, analysts say, compared with every two years or so in developed economies. Fickle customers mean market share shifts swiftly, and the fortunes of companies rise and fall almost as fast.

Apple’s and Samsung’s position in the high end of the market allows them to collect most of the profit from smartphone sales in China, analysts say. Apple sells 55 percent of the phones priced at $450 or more, with Samsung accounting for 40 percent, according to Sanford C. Bernstein, a brokerage firm. Apple’s iPhone 5 costs about $780, while Samsung’s Galaxy S4 costs about $850.

But growth in this segment is slowing. Analysts at Bernstein expect sales of smartphones $450 and up in China to rise to 296 million units this year, from 235 million in 2012. But the total will flatten out at around 300 million a year, the firm said.

By contrast, sales of phones priced at less than $200 are expected to surge to 400 million units this year, from 234 million last year, with a further jump to 685 million in 2015, the firm says. The low end is growing faster because prices of smartphones have fallen so much that hundreds of millions of Chinese consumers are now able to replace old-fashioned feature phones that lack mobile data capabilities.

“The question for Samsung and Apple is whether they are equipped to compete in the developing markets, especially China, where the growth is going to happen,” said Pete Cunningham, an analyst at Canalys.

Some of these phones are simply knockoffs of handsets from Samsung or Apple, often housed in cheap plastic shells or offering less memory, lower-resolution screens or inferior cameras. Last year, one Chinese brand, Goophone, introduced a clone of the iPhone 5 for $150, even before Apple released the iPhone 5 in China.

It bears a resemblance to Apple’s phone, but the Goophone i5 is different in an important respect — it runs on a version of Google’s Android software.

The challenge for the Chinese makers is to go global. Coolpad began selling its Quattro 4g in the United States through MetroPCS, a mobile network operator. It drew mixed reviews in the United States, but it sold for less than $100 under some promotions.

Article source: http://www.nytimes.com/2013/07/06/technology/chinas-emergence-as-largest-smartphone-market-changes-industry.html?partner=rss&emc=rss

G.M. Workers in South Korea Plan a Walkout

The partial walkout would punctuate annual wage talks that began in April. G.M.’s chief executive, Dan Akerson, and other executives have raised concerns about a further increase in labor costs partly because of wage lawsuits filed by G.M.’s South Korean workers.

But G.M.’s South Korean union has said its “cost per vehicle” is half that of Australia and lower than several other peers, including Russia.

The union was also angered by G.M.’s decision not to produce the next-generation Cruze compact in South Korea, which prompted fears about a potential restructuring of the unit.

Last week, 79 percent of union members at G.M. Korea voted in favor of striking. Union leaders decided late Wednesday to hold a partial strike for six hours July 4 and to refuse overtime and weekend work for now, said Choi Jong-hak, a union spokesman.

He said union leaders would decide whether to continue the partial strike depending on progress in the wage talks. “The management did not come up with any concrete proposal during yesterday’s talks,” he said. “It will be difficult to reach a deal, and we are likely to continue the strike.”

From July to September last year, G.M. Korea suffered its biggest strike since it was created in 2002, resulting in lost production of 40,000 vehicles.

G.M.’s South Korean unit makes more than 4 of every 10 Chevrolet-branded vehicles sold globally and supplies almost all Chevrolets sold in Europe.

It also produces vehicle kits for assembly in China and other emerging markets. The unit exports the Opel Mokka sport utility vehicle to Europe and the Chevrolet Spark minicar to the United States and other markets.

Under the annual wage talks, G.M. Korea’s union negotiators have called for a bonus equivalent to three months’ salary and a one-time payment of 6 million won, or $5,300, as well as a basic salary increase of 130,500 won.

The two sides have also locked horns over a new shift system that will eliminate overnight work at the beginning of 2014, with the union demanding that management make up for reduced wages resulting from fewer work hours.

The union is also calling for the company to produce the revamped Cruze as well as other next-generation models in South Korea and to have the unit continue to play a key role in engineering and designing G.M.’s mini- and small cars.

The spokesman for G.M. Korea, Kim Byeong-soo, said: “Wage talks are still under way. We hope to expedite negotiations to reach a deal and avoid production losses.” He added that the annual wage pact was traditionally reached by early August.

On May 28, Hyundai Motor, South Korea’s biggest automaker, and its labor union started their annual wage talks. The union is demanding a bonus equivalent to eight months’ salary and an extension of the retirement age to 61, among other things.

Article source: http://www.nytimes.com/2013/06/28/business/global/gm-workers-in-south-korea-plan-a-walkout.html?partner=rss&emc=rss

Asian Stocks Slide Led by Tokyo on Worries

Japanese media reports said overseas hedge funds may be dumping Japan’s equities following a disappointment earlier in the week, when the Bank of Japan didn’t take additional easing measures to keep economic revival going.

The Nikkei 225 index, which plunged more than 6 percent earlier in the day, was 4.5 percent down by early afternoon to 12,672.70.

Adding to the woes was the dollar’s recent fall, trading at about 95 yen Thursday, in a reversal from 100 yen earlier. A cheap yen is a boon for Japan because it helps the nation’s giant exporters by raising their overseas revenue when translated into yen.

Elsewhere, the Hang Seng index fell 2.7 percent to 20,775.54, while the Kospi in South Korea lost 1.3 percent to 1,887.33. Benchmarks in Australia, Singapore and Taiwan all fell 1 percent or more.

Mainland Chinese were pummeled as accumulating signs of a slowdown in growth in the world’s No. 2 economy caused investors to retreat. The Shanghai Composite Index slid 3 percent to 2,144.74 while the smaller Shenzhen Composite Index lost 2.9 percent to 954.64.

Japan has been one of the main influences in the markets as investors have scrutinized the authorities’ attempts to get the country out of its two-decade stagnation.

In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to 2 percent. The euphoria that drove the Nikkei up to five-year highs has since dissipated and the index is now around 20 percent down from its recent peak.

The other major driver in markets has been the uncertainty over the future course of U.S. monetary policy following a solid, if unspectacular, improvement in economic data.

The markets now expect some reduction in the Federal Reserve’s monthly asset purchases sometime this year. The stimulus has been one of the main reasons why many assets, such as global stock markets and emerging markets, have bounced back over the past few years.

Analysts said markets will likely remain on edge until next week’s Fed policy meeting for greater clarity on the timing and extend of any tapering.

“Risk appetite continues to shrink as the ongoing nervousness over Fed tapering continues to provoke significant position adjustments across markets,” Mitul Kotecha of Credit Agricole CIB in Hong Kong said in a market commentary.

Among individual stocks, Apollo Tyres Ltd., an Indian company, tumbled 13.6 percent after announcing plans to buy American tire maker Cooper Tire Rubber for $2.5 billion.

Japanese exporters were battered because of the rising yen. Suzuki Motor Corp. sank 6.3 percent. Olympus Corp. slid 6.6 percent. Bridgestone Corp. shed 5.5 percent.

On Wall Street, the Dow Jones industrial average fell 0.8 percent, to close at 14,995.23. The Standard Poor’s 500 index fell 0.8 percent to 1,612.52. The Nasdaq composite index fell 1.1 percent, to 3,400.43.

In Europe, Wednesday Britain’s FTSE 100 index fell 0.6 percent to close at 6,299.45 while Germany’s DAX fell 1 percent to 8,143.27. The CAC-40 in France ended 0.4 percent lower at 3,793.70.

The euro rose to $1.3349 from $1.3331 late Wednesday in New York. The dollar fell to 95.43 yen in Tokyo, from 95.71 yen.

Benchmark crude oil was down 6 cents at $95.81 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 50 cents to close at $95.88 on the Nymex on Wednesday.


Article source: http://www.nytimes.com/aponline/2013/06/12/world/asia/ap-world-markets.html?partner=rss&emc=rss

Off the Charts: A Troubling Survey on Global Corruption

Bribery scandals have dominated headlines in several countries in recent months, among them India and Nigeria. International enforcement of antibribery laws has been increasing in the United States and major European countries.

A new survey of corporate officials and employees in 36 countries in Europe, Africa, India and the Middle East indicates that there is plenty of corruption that needs investigating.

Over all, 20 percent of the respondents said they knew of incidents at their own companies within the previous year that could be construed as cooking the books — moves to either understate expenses or overstate revenue. Among senior managers and directors, the figure was 42 percent.

The survey was conducted late last year by Ipsos, a market research firm, on behalf of Ernst Young, a major accounting firm.

Ernst did not break down responses to the cooking-the-books question by country, but indicated that managers from emerging markets were more likely to say that had happened than were managers from more developed economies.

The firm did provide country-by-country results for some questions, as can be seen in the accompanying charts. Asked if companies in their countries “often report their financial performance as better than it is,” more than half the respondents in nine countries — Nigeria, Slovenia, Russia, Spain, Croatia, India, Serbia, Kenya and Austria — said that they did.

At the other end of the scale, fewer than a quarter of respondents in eight countries — Finland, Norway, Switzerland, France, Romania, Sweden, Hungary and the Netherlands — said that happened.

The survey was commissioned by Ernst’s fraud investigation and dispute services group, which does not perform standard corporate audits but instead is hired by companies to look for signs of corruption or fraud in their own operations. It did not include either China or the United States.

David Stulb, the global leader of that group, said it was growing in part because many companies were worried about enforcement of the American Foreign Corrupt Practices Act, which bars the bribing of foreign officials, and of similar laws in other developed countries. Those surveyed included employees and officials of overseas subsidiaries of multinational companies. The respondents were promised anonymity, Ernst said.

The survey revealed what Ernst called a “corruption perception gap” in many countries, where respondents said bribery and corrupt practices were far more common in other parts of their country than they were in their own industry. At the extreme, 94 percent of respondents in Kenya thought corruption was widespread in the country, but only 34 percent thought it was a problem in their own industry.

The responses indicated that corruption and bribery are rare in the Scandinavian countries, but common in some Southern and Eastern European countries, as well as in India, the Middle East and Africa.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/05/18/business/economy/a-troubling-survey-on-global-corruption.html?partner=rss&emc=rss

P&G Shares Fall After Forecast Misses Expectations

The world’s largest household products maker also posted fiscal third-quarter profit that topped estimates despite sales that were weaker than both the company and analysts had anticipated.

PG has been trying to reinvigorate itself under Chief Executive Bob McDonald. The company has held or gained market share in more of its businesses in the latest quarters after stiffer competition from rivals like Unilever and Colgate-Palmolive Co.

While products such as Tide Pods have boosted U.S. sales, PG still needs to figure out the formula for getting products such as Pantene shampoo to stand out among competitors, it said. PG plans to promote several brands during the current quarter, including Olay skin care products.

Net sales decreased in the hair care and skin care business in the latest quarter.

“We’ve got a little bit more work to do” in skin care, McDonald told reporters.

In February 2012, McDonald unveiled a $10 billion restructuring plan including thousands of job cuts after PG acknowledged it was not nimble enough, especially in emerging markets.

Shares of PG fell to $79.65 in premarket trading after closing at an all-time high of $82.54 on Tuesday.

“We continue to believe the necessary improvements at PG from both a cost and innovation standpoint will take time, and the stock seems to already reflect further momentum,” said Oppenheimer analyst Joseph Altobelllo, who rates the stock “market perform.”


PG, whose other brands include Pampers diapers and Gillette razors, forecast fourth-quarter core earnings of 69 cents to 77 cents per share, while analysts were looking for 81 cents, according to Thomson Reuters I/B/E/S. PG earned 82 cents per share in the fourth quarter of fiscal 2012.

PG said it earned 99 cents per share on a core basis in the quarter ended in March, topping analysts’ target of 96 cents. Core earnings exclude items such as restructuring charges.

Overall sales rose 2 percent to $20.598 billion while analysts were looking for sales of $20.73 billion. The company had forecast 3 percent to 4 percent in sales growth.

PG’s organic sales, which strip out the impact of divestitures and foreign exchange changes, grew 3 percent – at the low end of its forecast of 3 percent to 4 percent.

The company saw the strongest volume growth in health care at 5 percent, helped by new toothpastes and a stronger cold and flu season.

On a net basis, the company earned $2.57 billion, or 88 cents per share, in the fiscal third quarter ended in March, up from $2.41 billion, or 82 cents per share, a year earlier.

The company had forecast core earnings per share of 90 cents to 96 cents and net earnings of 80 cents to 88 cents.

Last April, Wall Street analysts roasted McDonald on a conference call after PG issued a profit warning and decided to rescind some price increases. The dour performance prompted activist investor Bill Ackman to call for changes last summer when he bought the shares.

Ackman’s Pershing Square had a 1.02 percent stake in PG, or 27.95 million shares, as of December, making it the company’s eighth-largest shareholder, according to Thomson Reuters data.

PG said it now plans to repurchase $6 billion of its stock this year, at the high end of its prior forecast for $5 billion to $6 billion in buybacks. Last June, PG decided to hold off on buybacks, but in August quickly reverted back to its usual plan. The stock is currently trading near all-time highs.

(Reporting by Jessica Wohl; in Chicago; Editing by Jeffrey Benkoe)

Article source: http://www.nytimes.com/reuters/2013/04/24/business/24reuters-procter-results.html?partner=rss&emc=rss

DealBook: Citigroup Sells Turkish Consumer Unit as It Pares Global Operations

Hakan Ates, chief of DenizBank, which is buying Citi's consumer banking business in Turkey.Murad Sezer/ReutersHakan Ates, chief of DenizBank, which is buying Citi’s consumer banking business in Turkey.

LONDON – Citigroup agreed on Thursday to sell its consumer banking business in Turkey to the local lender DenizBank in its latest move to offload international assets.

DenizBank, which was itself acquired by the Russian firm Sberbank for $3.5 billion last year, will acquire assets worth around $650 million and customer deposits totaling $800 million, according to a company statement. The price for the deal was not disclosed.

Shares in the Turkish bank rose 9.5 percent in afternoon trading in Istanbul on Thursday.

The move by Citigroup to sell its Turkish consumer banking unit comes as the financial giant is paring back its operations outside of the United States.

In December, Citigroup announced plans to pull back or sell its consumer banking businesses in several emerging markets, including Pakistan, Romania and Paraguay.

The efforts are part of a plan by Citigroup’s new chief executive, Michael L. Corbat, to cut yearly costs by $1.1 billion by 2014. The plan also includes 11,000 layoffs across the bank’s global operations.

As Western banks revamp their businesses in the wake of the financial crisis, many are reducing their worldwide footprint in countries where they cannot compete with local rivals.

The British bank HSBC also has announced a series of disposals in recent months, particularly in developing economies like Pakistan and Colombia.

The deal for Citigroup’s Turkish consumer banking business is expected to close in the third quarter of the year.

Article source: http://dealbook.nytimes.com/2013/04/11/citigroup-sells-turkish-operations-as-it-pares-back-internationally/?partner=rss&emc=rss

Medtronic Earnings Up Nearly 6%, but Sales Fall

European markets generate about a quarter of Medtronic’s total revenue.

Omar Ishrak, the company’s chairman and chief executive, called the quarter “challenging.” Still, he referred to signs of improvement in cardiac rhythm management and spine devices, the company’s largest businesses, partly because of an increase in procedures, and because Medtronic increased its share of those markets.

Mr. Ishrak said price pressure continued, especially in cardiac rhythm management, but he predicted it would subside as Medtronic introduced implantable defibrillators and pacemakers this year.

Medtronic, which also makes heart stents, heart valves and insulin, reiterated its outlook for the fiscal year, calling for diluted earnings per share of $3.66 to $3.70 on revenue growth of 3 to 4 percent.

The company said its net income increased to $988 million, or 97 cents a share, in its third quarter, which ended on Jan. 25, from $935 million, or 88 cents a share, a year earlier.

Excluding onetime items, mainly related to acquisitions, earnings were 93 cents a share. On that basis, analysts on average were expecting 91 cents.

Michael Weinstein, a JPMorgan Chase analyst, said the better-than-expected earnings stemmed mainly from the extension of the research and development tax credit, which was not uniformly reflected in Wall Street models. It added 3 cents a share in the quarter.

Revenue rose 4 percent to $4.03 billion.

Sales of implantable heart defibrillators fell to $654 million from $674 million, while sales of pacemaker system declined to $459 million from $467 million. And sales of spinal products fell to $753 million from $784 million.

Growth in emerging markets, where revenue increased 20 percent to $475 million, offset the weakness in Europe.

Shares of Medtronic, which is based in Minneapolis, fell $1.32, or 2.8 percent, to close at $45.80 on the New York Stock Exchange.

Article source: http://www.nytimes.com/2013/02/20/business/medtronic-earnings-up-nearly-6-but-sales-fall.html?partner=rss&emc=rss

Media Decoder Blog: Indian Music Service, Taking Page From Spotify, Goes Pro

Western music fans have no shortage of digital music services to choose from, and that abundance is spreading around the world. Apple’s iTunes is now in 119 countries, and others are racing to plant their digital flags everywhere. This week, for example, Spotify opened in Italy, Poland and Portugal, bringing its reach to 23 countries.

Digital Notes

Daily updates on the business of digital music.

But just as interesting, and in the long run perhaps as significant to competition, is the rise of services that serve regional markets intensely. One is Saavn, a Spotify-like streaming service that specializes in Indian music, and has garnered 10.5 million monthly users with advertising-supported free listening. This week it will announce that it has taken another page from Spotify’s book, by offering a premium version at $4 a month that eliminates the ads, lets users listen to songs offline and will eventually add other features like higher quality audio.

Saavn, which has offices in New York, India and Mountain View, Calif., has a catalog of 1.1 million songs in nine languages and is available in more than 200 countries, with about 70 percent of its consumption within India, said Rishi Malhotra, one of its founders. Like Spotify, iHeartRadio and other Western services, it is an official partner of Facebook. About 80 percent of its use is on mobile devices, Mr. Malhotra said, and when the premium service, Saavn Pro, is opened in March, it will at first be available only for Apple devices.

The pricing is significantly lower than Western services. “We wanted to make it globally acceptable,” said Mr. Malhotra, who is based in New York. “The $10 price point that you see from a lot of music services we use here is way out of reach from what would fly in India or a lot of other emerging markets.”

Saavn believes it can succeed in India not only through its catalog of Bollywood hits, but through technological touches that may be meaningful only to Indian listeners. One example is the ability to search for a Bollywood song based on the actor who lip-synchs it — often more memorable to fans than the “playback” singer who actually provided the voice.

If successful, Saavn Pro could give the company an advantage in India’s quickly developing digital music market, which already has a handful of streaming services, like Dhingana, as well as a strong presence in downloads from Nokia. Yet that market is still tiny for a country of India’s size and overall media spending. According to the International Federation of the Phonographic Industry, recorded music had only $141 million in trade (or wholesale) value in 2011. A recent report by Ernst Young said that music and radio combined count for only 2.4 percent of India’s media and entertainment spending, which for 2011 it estimated at $18 billion.

Part of the reason for music’s small proportion of India’s media economy is that popular music in India is dominated by the film industry. But a greater reason is piracy; the federation estimates that 55 percent of Internet users in India go to unlicensed music services on a monthly basis. That is slowly starting to change, music executives say, as courts there crack down on infringement and legitimate digital services proliferate. Apple’s iTunes opened there in December, and Nokia says it sells 1.4 million songs a day at its download store in India.

And Indian record companies are approaching digital business without the baggage that has been complicating deals with Western labels and services for more than a decade, Mr. Malhotra added.

“The labels in India are not reluctant about digital,” he said. “It’s not like they are protecting against some established, older revenue stream. It’s all found revenue for them.”

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/13/indian-music-service-taking-page-from-spotify-goes-pro/?partner=rss&emc=rss