WHY RARA.COM IS FAILING TO ADDRESS THE MASS MARKET
The other day I pointed out four reasons why Rara.com is worth checking out. While Rara.com certainly brings a fresh breeze into the market, I believe they will have a tough time. Here’s why:
Let’s look again at what lets Rara.com stand out in the ecosystem of streaming services. The biggest difference between Rara.com and the existing players is clearly the user interface, which is designed to be very easy and intuitive. In the launch presentation Rob Lewis, chairman of Rara.com, said that the market of digital music is still in its infancy and has not yet reached the mainstream. Players like Spotify, at the same time, do not address the mainstream market, but a small niche instead:
The graph shows the audience along the two axes “music knowledge” (from “music listener” to “music guru”) and tech knowledge (from tech laggard” to “tech wizard”). According to Lewis, a majority of existing music services (including Spotify, Napster, Pandora, but also iTunes) are “designed for people who know a lot about music and also are technically very literate” (i.e., the upper right quadrant), and fail to meet mainstream requirements. Rara.com, on the other hand, focusses on the remaining untapped market, that represents a majority of 80% of the entire market, according to their analyses.
Quite frankly, I think that Rara.com is not going to be able to get those remaining 80% of the market, and I’m going to explain why.
Let’s look at the three remaining quadrants one after the other.
Tech laggard / music guru (top-left)
First, there is the segment of tech un-savvy music gurus. A music guru is someone that knows a lot about music, has his favourite artists that he follows, knows exactly what he wants to listen to. He’s that type of person that nows first about the latest releases in his genre, and gets excited about previously unreleased tracks. I find it hard to imagine that person tuning into Rara.com and saying “Gee, today I feel like listening to the best of the 90s”, no matter what his technical skills are.
Tech wizard / music listener (bottom-right)
A music listener, as opposed to a music guru, is someone who occasionally listens to music, probably enjoys Rihanna and Nickleback, and would say things like “I listen to anything that’s on the radio”. The big question is: Will such a casual music listener really use a streaming service, be it Rara.com or Spotify? That aside, a tech wizard won’t shy away from (presumably) more complicated services like Spotify or Deezer (who also have radio functionality). So if anything Rara.com will have to compete with those within this segment.
Tech laggard / music listener (bottom-left)
In this segment finally we have people that are neither tech wizards nor music gurus. People that don’t care much about music, nor get excited about new techonolgies. This is the segment where Rara.com might indeed have the best chances to grow. And admittedly this segment is probably the largest in terms of the number of people in it. But the downside is: This segment is full of people that don’t care much about music, and won’t get excited about new technolgies. Given these characteristics, this segment is probably the most difficult and least profitable of all segments for two reasons: First, it will be very hard to convince people in this segment to start using a streaming music service in the first place. Second, it will be quite a challange to convert those free users into paying users.
Rara.com is probably quite aware of these concerns, and addresses them quite cleverly: First, they have closed a partnership with HP (more here), which will push Rara.com into the homes of an estimates 60m users a year. This will lower the hurdle to get started quite signifcantly. After all, this technique used to work pretty well for Microsoft Internet Explorer back in the 90s.
Second, Rara.com offers quite a generous trial period that starts at 99p / month for a whopping three months. The bet here is that after these three months a large enough number of users will not cancel their trial and convert to premium users paying $4.99 or $9.99 a month.
Summary
Of the four segments presented, Rara.com is unlikely to be able to claim leadership in all of them: Music gurus will not be happy with a service that is designed for the mass market. In the segment of tech savvy occasional music listeners Rara.com will compete with the established players. I therefore believe Rara.com has its strongest potential in the segment of tech laggards and occasional music listeners. The downside though is that occasional music listeners are less likely to convert from non-users to users, and from free users to paying users. If the deal with HP and the introductory pricing turn out to be successful, Rara might still have a good chance to gain market and generate enough revenue to become a success.