How Emerging Markets Are Transforming Global Streaming

The report emphasizes that while developed markets show higher ARPU – with figures around USD 34 compared to about USD 8 in emerging markets – the sheer scale of subscriber additions in emerging markets is making these regions critical. In many emerging regions, even though the paying conversion rate is considerably lower, their massive potential user base presents a significant opportunity. For example, in India, estimates indicate that around 20 million out of 200 million monthly active users are paid subscribers, reflecting a paying ratio of roughly 10%. Similarly, Tencent Music experienced a paying ratio of 18% in 2023, which is approximately half of Spotify’s 39%. These lower conversion rates are counterbalanced by the high volume of freemium users who can eventually be converted to paid subscriptions as local income levels improve and market strategies mature^[1].

One of the principal challenges in emerging markets is the gap in monetisation compared to developed markets. The report points out that emerging market ARPU is roughly four times lower than that in developed regions. This disparity means that even with rapid subscriber growth, the immediate revenue uplift remains constrained. In 2023, emerging markets contributed only 29% of the growth in paid subscription revenue even though they accounted for around 60% of the net subscriber additions. This divergence underscores a key challenge for global streaming platforms: maintaining revenue growth while expanding into regions characterized by lower individual spending^[1].

Emerging markets are also marked by a higher degree of fragmentation compared to developed markets. The leading three major music companies command only about 20-40% market share in emerging regions, in contrast to a market share of over 70% in more mature, developed markets. This fragmentation is partly due to the growth of local music genres and artists, which have not only enhanced domestic appeal but also achieved international recognition. The rise of non-English language acts, with notable increases in representation in global charts, further illustrates the unique cultural dynamics in these regions. These local trends are prompting global streaming services to tailor their offerings, emphasizing localized content strategies that resonate with domestic audiences while also contributing to the diversification of global music consumption^[1].

In response to these transformations, top players in the music streaming space are increasingly focusing on emerging markets. Despite the lower ARPU in these regions, the substantial volume of freemium users provides ample scope for converting new subscribers over time. Major music companies are reshaping their investment priorities by targeting local acts and signing distribution agreements with regional labels. In addition, highly publicized partnership activities and acquisitions in markets such as Latin America, Asia, and Africa are evidence of a deliberate strategy to secure a stronger foothold in emerging markets. For instance, firms like Sony Music and UMG are expanding their local operations by scaling regional A&R teams, entering joint ventures, and finalizing strategic acquisitions to capture a greater share of the growing streaming audience^[1].

Over time, the continued maturation of emerging markets is expected to lead to improved paid conversion rates. As these regions develop economically, rising incomes are likely to drive enhanced monetisation potential. Moreover, the transition from freemium models to more sophisticated tiered subscription offerings, including premium and superfan segments, will further narrow the revenue gap between emerging and developed markets. This evolving dynamic is set to influence global streaming revenue forecasts, which are being adjusted to reflect a more optimistic long-term outlook based on stronger subscriber growth, especially in the live music and publishing segments. The overall momentum provided by emerging markets is therefore anticipated to shape strategic investments, pricing strategies, and content localization efforts on a global scale^[1].

Emerging markets are transforming global music streaming by driving the next phase of subscriber growth despite lower ARPU levels. Their influence is being felt through a high number of freemium users, lower conversion rates, and significant market fragmentation which necessitates customized local strategies. Global streaming platforms and major music companies are increasingly investing in these regions through strategic partnerships, localized content development, and targeted marketing efforts. As local markets mature and improve their monetisation capabilities, burgeoning subscriber bases are expected to translate into sustainable revenue growth, ensuring that emerging markets remain pivotal in the evolution of global streaming services^[1].