Taking on Spotify, Apple Music in Africa, Mdundo IPO raises $6.4m — Africa

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After Martin Nielsen moved to Kenya in 2012 to work with a venture capital firm, he soon noticed an obvious trend: most locals consumed music by downloading tracks illegally.

Despite the rise of streaming as the primary mode of music consumption globally, illegal music download sites have remained a major source for most users across Africa. The impact for local African artists has been missing out on major potential earnings from music sales or royalties and a reliance on live shows and endorsements for income.

Having seen the evolution Sweden’s Spotify from Scandanavia into a global giant, Nielsen, a Danish native, set out to create an alternative to illegal music downloads for African users and artists. “Our starting point in search of the solution was to provide a good alternative that’s completely better than the illegal services out there,” Nielsen tells Africa. “What was important for us was finding a solution that fit the customer behavior—that’s the key argument for moving users from an illegal website to a legal one.”

As such, one year after moving to Kenya, Nielsen launched Mdundo, a music downloads site that mirrored user experience of illegal platforms by allowing locals find and download songs to their devices for free. But to differentiate from illegal platforms, Mdundo signed up musicians to list their catalog legally on its platform and generated revenues by selling up to 10-second long ad space on songs. Essentially, while users can download music for free, they often hear short ads on tracks before the song begins to play. Ad revenues generated from songs are shared through a 50% split with artists signed up to the platform.

The model has seen Mdundo sign up 80,000 African artists with a collective catalog of 1.5 million songs. The platform generated $300,000 in ad sales last year, Nielsen says.

As it doubles down on scaling across Africa, Mdundo listed publicly on Nasdaq First North Growth Market Denmark at the start of the month and raised $6.4 million. The choice of listing in Denmark, beyond Nielsen’s obvious ties to his home country, is linked to local appreciation for disruptive music businesses and models.”We’ve seen success stories coming out of here like Spotify coming from Sweden,” Nielsen argues. “Investors will understand what we’re doing and understand the massive potential there is in transforming a huge illegal music market to a legal one.”

With only 5 million active users, Mdundo still only services a sliver of the potential market in Africa and will face competition from other players on the continent. One of those is Boomplay, the music streaming service owned by Transsion—Africa’s top phone maker. After growing rapidly on the coattails of its parent company, Boomplay raised $20 million last year to fund expansion plans. And while Spotify is available in only five African countries (Algeria, Egypt, Morocco, South Africa, Tunisia), Apple Music has recently expanded to 30 African countries.

But despite the merits of streaming, including allowing African artists participate in the global digital music economy, there is a major drawback for users, especially outside high income and middle-class brackets. The high costs of internet access across Africa coupled with slow speeds mean streaming remains an expensive option for most, particularly in comparison with one-time downloads.

“There’s a lot of value in seeing what’s taking place and making sure that it benefits the right people,” Nielsen tells Africa. “It’s not necessarily about trying to change consumer behavior—there’s more value in trying to tap into a market that’s already existing but right now not benefiting the creators.”

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