VK rushed to the platforms – Newspaper Kommersant No. 153 (7354) of 08/23/2022

The VK holding based on the United Media Agency (UMA) plans to distribute content to music streaming platforms, including competitors of VK Music – Yandex.Music, Sound and others. The company promises to place tracks by Russian artists on foreign platforms as well. It’s still important for copyright holders to be present on YouTube Music, Spotify, Apple Music and Amazone, market participants say. But to deliver content to these platforms, you need to make payments in foreign currency and have a non-resident partner, experts explain, which will affect the amount of payments to copyright holders.

VK will digitally distribute music to streaming platforms, Nikolay Duksin, director of the music ecosystem and video content department, told Kommersant. A digital distributor will be created on the basis of UMA (part of VK). Now UMA works as a mono-aggregator, that is, it delivers content to the VK Music platform, but VK wants the aggregator to work with all streaming storefronts. Mr. Duksin clarified that the company will have the opportunity to place tracks on foreign platforms as well.

VK, according to Nikolai Duksin, is already working on creating its own music label. He did not specify the volume of investments in the development of services, noting only that the company is expanding the team, including the music editorial staff. “We have a competitive advantage because we are a huge IT company, which makes the infrastructure more resilient to stress,” said Mr. Duksin. According to him, now the main market instruments in digital distribution are the quality of service and the rate that the aggregator reserves for itself and can offer the right holder: “We will offer potential customers something more interesting, including by optimizing infrastructure costs.” In the spring, against the backdrop of an increase in the load on the infrastructure, VK asked the Ministry of Digital Transformation to help find a vendor ready to sell the company “tens of thousands of servers” (see Kommersant dated April 25).

Streaming, delivering music to the listener, remains the fastest growing segment of the music market. According to analysts from Technologies of Trust (formerly PwC in Russia) and K22, the country’s concert industry in terms of revenue in 2022 will fall to the level of 2017 due to the loss of foreign and some domestic performers, but music streaming will grow by 20–25 % year on year (see Kommersant dated August 2). The AnalyticResearchGroup estimated the Russian streaming market in 2021 at $246 million.

Now the largest participant in the digital music distribution market in the Russian Federation is the Zvonko Group (created in 2021, unites the First Musical, National Music Publishing House, Soyuz Studio, Soyuz Music), the French Believe Digital (Black Star, EXO Music, Max Korzh) and the American ONErpm (A’Studio, Igor Butman, Electrophoresis, Tequilajazzz), as well as a number of small companies. Head of ONErpm Eastern Europe Nadezhda Boychevski notes that the segment remains highly competitive: “Digital distributors compete with catalog volumes, their quality and services for partners, coverage of territories.” According to her, VK has “sufficient expertise and understanding” to work in the segment.

But a Kommersant source on the market doubts that VK can seriously compete with current market participants: “Firstly, it is not entirely clear how the company plans to deliver artists, for example, to Yandex.Music, which has direct contracts with all major rights holders, and secondly, in the current conditions, it is important for artists to have a presence on YouTube Music, Spotify, Apple Music and Amazone, which operate in a number of countries where there is a high demand for Russian music, for example, in Israel.” These platforms, the interlocutor of Kommersant explains, impose “certain requirements on direct partners”, for example, settlement in dollars and the presence of a legal entity in the United States. As another Kommersant source in the market clarifies, a non-resident partner is now needed to display content on foreign platforms. But then the intermediary will take part of the commission, that is, it will be more difficult for VK to offer favorable conditions to copyright holders. According to one of Kommersant’s interlocutors, now the distributors’ commission is about 10%.

Julia Silence