A new streaming music service is launching in Canada with an aggressive pricing strategy to woo listeners who have never paid for digital tunes.
Just days after Paris-based Deezer.com announced it would be setting up here in the new year, the London-based Rara.com said Tuesday that it would soon launch in more than a dozen markets, including Canada, the U.S., Mexico, the U.K., France and Germany. The company originally said Canadians could access the site on Tuesday, but now says it will be available "later this week."
In Canada, Rara will compete against similar streaming services Rdio and Slacker Radio, while there are even more well-known competitors in the U.S. and elsewhere including Spotify and MOG.
But chairman Rob Lewis believes Rara can convince the average consumer that it's a worthwhile investment to pay for music digitally.
"I believe that almost all of the services that are available today are targeted at tech-savvy people who know quite a lot about music," Mr. Lewis told Reuters in an interview. "That is only 20 per cent of consumers, we are interested in the 80 per cent."
The company's strategy hinges on a year and a half of market research to determine what exactly consumers would be willing to pay for unlimited access to a growing catalogue of more than 10 million songs.
"When the CD came out within about 18 months it became the primary format for most people in the West. We're sort of six to seven years after the original launch of iTunes and the research ... shows the vast majority of consumers really haven't adopted digital yet," Mr. Lewis said in an interview.
The company researched whether to entice consumers with a seven-day trial or a free month and also looked into whether a freemium model — offering a limited amount of free access with the option to pay for more — would work.
Rara eventually settled on a price of 99 cents, at least for the first three months. Then consumers must pay the industry standard $4.99 for unlimited web access and an additional $5 a month for mobile access.
The company's research suggested 50 per cent of consumers would be willing to give the service a try at the 99 cent price point, Mr. Lewis said, and would pay $5 if they liked it. Rara plans to spend "huge amounts of money" in promotion and hopes consumers take up their offer. Given that there are only about five million consumers paying for streaming music worldwide, there's enormous potential to grow, he added.
"(Consumers) are happy to pay $5 a month but they don't want to straight away, they want to have the freedom to try it out, see whether they get hooked and know they can cancel before they've spent any significant amount of cash," Mr. Lewis said.
"We're launching in markets that in total reach 850 million consumers and we believe it bodes very well for making streaming services mass market for the first time."
Mr. Lewis said the logistics involved in securing rights to operate in Canada were not particularly straightforward but it was important to the company that it get done.
"The reality is the regime of publishing in every territory in the world is difficult. In Canada, the regime is such that sometimes the rates that relate to publishing can actually be finalized many years after the period of time that you're actually collecting money from the consumer," Mr. Lewis explained.
"That's quite an extreme case we don't experience anywhere else in the world but we took the view and thought it was important ... to go that extra length and make sure we'd launch in Canada simultaneously and not treat Canada in any way as a second class territory.
"We would hope that at some point in the future that situation would improve in Canada because the technology industry moves in days and weeks, not in years. But we live with it."
With files from Reuters