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YouTube Outshines Spotify in This Fast-Growing Market

Harsh Chauhan, The Motley Fool

Spotify (NYSE: SPOT) made a big splash in the Indian market at the end of February, racking up a million unique listeners within just a week of its launch. It was an impressive start for the streaming music service, which was late to the market in India, where local and international players are already vying for market share.

Spotify managed to strike a chord with Indian users thanks to its strategy of offering both free and premium plans. However, it didn't take long for Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) YouTube Music to crash Spotify's party and introduce the Swedish company to the harsh realities of this market.

Woman listening to music on her smartphone using headphones.

Image Source: Getty Images

YouTube Music starts with a bang

YouTube Music came to India on Mar. 12, shortly after Spotify's debut, and the Alphabet-owned service quickly left its own mark. According to Susan Wojcicki, CEO of YouTube, the music streaming service counted three million downloads in the first week of operations, eclipsing Spotify's start by a large margin.

The first big advantage for YouTube Music is its existing reach. YouTube is usually the go-to app for video content for almost anyone using a smartphone. The Google Play Store cites more than five billion installs for YouTube on Android smartphones. With that kind of installed base, Google simply has to inform existing users that they can now purchase a premium music streaming service.

But there are other advantages YouTube Music enjoys over Spotify. For instance, users have the first month of YouTube Music for free, after which they have to pay 99 Indian rupees (less than $1.50 at current exchange rates) a month. Spotify's premium users, on the other hand, also get the first month free but then must pay 129 rupees per month if they want to keep enjoying the premium service.

Spotify also offers weekly, monthly, quarterly, semiannual, and annual plans. The annual plan is priced at INR 1,189 ($17.24), which brings the effective monthly price close to YouTube Music's rate. However, Spotify does provide concessions to students on the premium plan.

So as far as pricing is concerned, there isn't much difference between Spotify and YouTube, though the latter has another weapon up its sleeve in the form of video content. For INR 130 (approx $1.88) per month, YouTube gives users access to ad-free, offline videos, YouTube Music, and YouTube Originals. As such, YouTube offers the total package compared with Spotify at nearly the same price.

This is why Alphabet's service is turning out to be more popular, setting up YouTube for success in the Indian market, while Spotify must overcome the intense competition.

Spotify could lose momentum in India

There are many music and video streaming services trying to cut their teeth in the Indian market. Spotify was late to the game, and it doesn't bring much new when compared with the likes of Prime and other local services.

Here's how the monthly subscription plans of the various streaming services in India shake out:

Monthly subscription plans of the various streaming services in India.

Source: Data from official websites. Chart by author

Spotify's monthly subscription is priced at the same level as Prime. However, the latter includes benefits such as video content and faster deliveries from the e-commerce site, among others.

The music streaming industry is expected to grow more than 20% annually in India, and despite its strong early start, Spotify is fighting an uphill battle against larger, more entrenched competitors. There's no guarantee that its promising start in the region will translate into long-term success.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy.