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Deezer breezes into UK market

Deezer breezes into UK market

After establishing itself firmly in its native France, where it is the second largest digital music service after iTunes, Deezer sees the UK as a crucial licensing bridgehead back into mainland Europe and aims to be live in at least a further three European markets before the end of the year.

Deezer UK Managing Director Mark Foster said Deezer's deal with Orange in France had served as a "real tipping point" for the music-streaming service: the Orange deal, signed last summer, more than doubled Deezer's installed subscriber base in a matter of weeks and it now has 1.2 million paying customers.

"The key thing is you need scale and volume and the question is about how you get the volume very quickly," Foster said.

"The way we did that in France was through a strategic partnership with Orange. They pay us a certain amount each month per active subscriber. The margins might be small but the volume is big so you get to the tipping point reasonably quickly. We will be looking to come to market with a key strategic partnership in the UK."

As a standalone service, Deezer will cost £4.99 a month for unlimited desktop access and £9.99 a month for mobile portability, with tie-in apps for iOS, Android and BlackBerry.

Unlike Spotify, however, Deezer will not be pursuing a freemium strategy in the UK - using a limited ad-funded free access tier to draw in customers and then upselling them to unlimited subscription tiers. A free Last.fm-style streaming radio service will, however, be available to all.

This will make partnership absolutely key in placing the service in front of a mass audience, delivering a music solution to telcos keen to improve customer retention.

"It attracts a younger audience and it gives them a certain hipness that is a great customer acquisition hook," said Foster of the Orange deal. "Plus the churn rate is really low - around 4%, which is tiny. There is a very high conversion rate from the 'try and buy' offering - it's around 65%."

Indeed, news of Deezer's UK launch comes after Spotify and Virgin Media continue to unveil details of their own partnership (see box).

Foster argued that, like eMusic, a heavy focus on bespoke editorial and recommendations on the site would help Deezer stand out from other streaming services.

Even with major partners in place, though, making a dent in the UK where digital is dominated by iTunes and Spotify is not going to be easy - something Foster is acutely aware of.

"I think there is room in the market for a number of different models," he said. "But I'm not sure there is room in the UK market for as many as there are out there now."

The company was closing in on deals with all the majors and key indies at the end of August ahead of its UK launch, but future expansion will be measured.

"Trying to expand very quickly in lots of markets is a higher risk strategy as you spread yourself very thin," argued Foster. "The Deezer strategy is to pick key markets, consolidate the user base there and make them self-supporting."

"The European headquarters for all the record companies are here [London] so if you're going to be licensing rights for multiple territories, this is a good place to do it," he added.

"In terms of Deezer's future expansion, the UK will be the springboard to the rest of the world. The urgent thing was to launch in the UK first - almost as a proof of concept."

Meanwhile, Foster has called for the British Government to follow France's lead and introduce a consumer incentive scheme similar to Carte Musique.

Introduced in October 2010, the Carte Musique (see box) was designed to draw younger consumers away from illegal music services by offering them discounted access to legal ones.

Foster said: "I think there is room for the Government to apply the carrot as well as the stick and to work with the industry as a whole. I'd like to see something here where the Government got involved to really help to stimulate the music industry and the digital music economy."

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