The managing director of Sony Music Middle East, Kevin Ridgely is charged with conquering one of the most difficult music markets in the world. At his disposal are some of the industry’s biggest names, and a huge range of bright young artists keen to break into the Middle East market.
January brought a new year, a new name and a new start for record giant Sony Music. Fresh from an acrimonious divorce from Bertelsmann, which spelt the end of the four-year-old joint label, Sony BMG, the newly single Sony is courting new markets. And top of its hitlist is the Middle East.
The music scene in Dubai has been underserved. Apart from the three or four large concerts a year, it’s been a largely DJ-led market with few acts.
With its untapped music scene and fledgling digital market, the region represents a blank slate for Sony, the label behind international bestselling acts such as Beyoncé and Britney Spears.
The company opened its first Dubai office earlier this year, marking the end of a two-year hiatus from the region and signalling Sony’s intention to ramp up its market share.
“We’re here to exploit, in the best possible sense, our content and our artists,” smiles managing director Kevin Ridgely, the man charged with overseeing the Mideast operations of Sony’s music arm. “To really market and sell our product, in a much less expensive way than might have been done in the past and hopefully a more clever way, based on how we view the market opportunities.”
It’s a mammoth task. Courtesy of its diverse demographic and sparse sales data, the Middle East is one of the most difficult regions to market to. By Sony’s count, the UAE is its largest market, followed by Saudi, Lebanon and Qatar, but Ridgely admits; “We really don’t know who the biggest demographic at the end consumer level is.”
The result is a narrow music scene that largely favours commercial artists, and where record stores are understandably wary of broadening their stock.
“Music stores here tend to focus on top 40 and big sellers rather than a deep catalogue. They have to be really careful about inventory items,” says Ridgely.
Sony hopes to use its weight to widen this repertoire, pulling in music from its Filipino, Indian and Latin artists, alongside more commercial acts, to help corner the mass market. For Middle East music lovers this will translate to broader — and in some cases cheaper — access to Sony CDs in record stores, and better access to its digital content such as ringtones or full tracks. Further down the line, the label is keen to start signing Arabic artists, to pad out its local portfolio.
It’s early days but Sony is already delivering. The label signed a deal last month with Virgin Megastores to sell CDs by emerging artists at discounted prices, typically below AED50 ($14). The ‘Discover Music’ campaign will feature four artists a month, and is aimed at convincing residents in the UAE to try out new acts.
“It’s about exposure to more music and titles, and more diverse music; music coming out around the world,” Ridgely says.
It’s also a deal that will drum up local support for niche acts. Part of Sony’s remit is to tempt its up-and-coming artists to add the UAE to their tour circuit, drawing in fans from neighbouring Gulf states and providing an alternative to the big name, Las Vegas-style concerts seen to date.
“For us, there is more opportunity in bringing small, to medium-sized acts to the region,” Ridgely explains. “There might not be the commercial viability for them to do a stand-alone show with a traditional booking agent, but if our office can arrange a co-promotion with their new album, radio promotions and signings, it’s much more likely they will come.”
A key piece of the jigsaw is the soft launch of Dubai’s first purpose-built indoor entertainment venue this March. The Palladium, a 5,000 standing capacity venue in Media City, opens the door for smaller acts that can’t fill a stadium. It also means that, for the first time, music concerts can be held in the full heat of the summer.
“The music scene in Dubai has been underserved,” admits Raymond Gaspar, general manager of the Palladium. “Apart from the three or four large concerts a year, it’s been a largely DJ-led market with few small acts.
“We’ll see more music-led events now, those just-breaking artists with one or two hits,” he continues. “It will broaden the music scene here are and we’ll regularly have artists passing by.”
Sony has already earmarked the Grammy award-winning Kings of Leon, and Scottish singing sensation Susan Boyle as potential Palladium acts, Ridgely says, and is in talks with Gaspar to firm up a schedule of events.
The move East is a fresh start for the world’s second largest label. Sony’s woes have snatched the spotlight from its artists in recent years, peaking with the meltdown of Sony BMG last August. Bertelsmann walked away with a hefty $1.2bn, which Sony traded for full ownership of the music company, including a stake in Simon Cowell’s Syco, which owns the rights to ‘Britain’s Got Talent’ and ‘X-Factor’.
With the launch of The Palladium, Dubai’s first purpose-built music venue, the UAE is set to become a lucrative staging post for labels keen to plug their smaller name acts. The venue, which can accommodate up to 3,000 seated and 5,000 standing, is the first in the region capable of accommodating smaller acts without the fan base to fill an arena.
This scarcity of venues is a key reason why the region has yet to establish a consistent infrastructure for live music, says Raymond Gaspar, general manager at The Palladium.
“To have a location that has everything under one roof, including a stage, that can handle the production as well and not cost the earth — there was nothing like it.
“We have made [the destination] more affordable.”
The Palladium incorporates a 25m stage, 5,000 sq ft of backstage space, seven VIP boxes and six food and beverage outlets. The building was designed with an initial budget of $3m; upon completion later this year, the bill will top $68m.
Still, the venue is already starting to make a name for itself. Last month, it hosted a sold-out show for award-winning R&B star Akon, and Gaspar is in talks with local concert promoter Live Nation, Sony Music and MTV Arabia for a string of shows next year.
“It’s about putting Dubai on the map as a music destination,” Gaspar says. “In many ways, we’ve made it possible. There isn’t anything else like [The Palladium] in the region.”
The merging of Bertelsmann and Sony Corp’s music units was initially aimed at fending off shrinking CD sales and music piracy, but it quickly became clear the pairing had deep fractures. Infighting meant the firm was slow to chase the digital download wave; it came late to deals with networking sites like MySpace, and was the last major label to scrap restrictive copyright software on its online song tracks. These missteps opened the door to its rivals, and saw the label lose crucial market share. In the last six months of fiscal 2008, Sony Music’s revenue was down 16 percent.
Now, in this corner of the Sony empire, the label is keen not to repeat its mistakes. It’s pushing to catch and cash in on the digital tide, rather than stem it.
“Historically our biggest business has always been the physical side [CDs], but the main reason we’re here now in the Middle East has to do with digital sales,” says Ridgely. “Almost all the telecom operators here are very interested in value-added services; music portals are starting to look for content to add and we want to be there to service them.”
Governments here have a lot of things to focus on. Realistically, the protection of music copyright is unlikely to be high on that list.
In the Middle East the paid download industry is in its infancy. iTunes, the pied piper of the digital world with 90 percent of online music sales, has yet to open a digital store here, likely dissuaded by the region’s limited piracy laws.
“The biggest hitch we face here is that there are very few legal download sites in the Middle East region,” Ridgely explains. “Our challenge is to convince the commercial powers to invest in that infrastructure and those opportunities.”
Sony is pinning its hopes on the launch later this year of Getmo Arabia, a site positioning itself as the region’s first one-stop-shop for digital media. The portal will offer songs, ringtones, music videos and mobile games to phone and net users for download. For a monthly subscription of $4.99, users will be able to download 15 tracks a month and access millions more. And unlike a record store, it can afford to stock everything.
“We are planning to have 25 million registered users within the next two years,” says Simon Rahman, director, Getmo Arabia. “What’s most important is the right mix of content; we have to have everything because the Middle East is so international.”
The top price for a song will be around $0.79, he adds; $0.50 cheaper than iTunes’ most expensive tracks.
“We think it’s a great model but we’ll see how people respond once we launch it and market the hell out of it.”
No one needs that new sales outlet more than the record industry. According to the International Federation of the Phonographic Industry, sales of recorded music worldwide dropped from about $38bn in 1999 to $18.4bn in 2008. Digital sales, however, hit a record $3.8bn last year.
Sony’s CD sales have dropped by 30 percent or more in the US and Europe in recent years, battered by the rise in illegal online sales. Sales in the Middle East are also on the decline, hit by the double whammy of virtual pirates and the huge number of counterfeit CDs on sale.
Saudi is the worst offender, Ridgely says. He estimates the number of legit record stores in the Kingdom has more than halved in the last three years, felled by the black market.
“People cannot compete with pirated products,” he says. “If you want to be a legitimate record store and people are selling pirated products next door, you just can’t do it.”
Now, the biggest battle for Getmo and sites like it will be drawing music pirates away from illegal file-sharing sites and back towards the pay-per-song model. Rahman admits it is a “massive issue” but believes the launch of a legal alternative will force governments to look again at anti-counterfeit measures.
“We are the first in the market and that is where the opportunity lies. The government can clamp down once there is a legal way to download; they can block peer-to-peer sites,” Rahman adds.
Ridgely is less optimistic. “Digital piracy is probably the number one issue that we face… [but] governments here have a lot of challenges and things to focus on. Realistically, the protection of music copyright is unlikely to be high on that list.”
Instead, he is hopeful that the fallout from high-profile court cases against individuals will work in the industry’s favour.
“There is a PR angle that hurts us a fair bit, but in the longer term it raises the idea that this is a problem. The net impact of suing, say, a grandmother is that we are protecting our rights and reminding people it is not a legal thing to do.”
Digital media site Getmo Arabia is the newest challenger for the Middle East’s download dollars. Following in the footsteps of brands such as Nokia Music Store, Getmo plans to win over online consumers with quality content, knockdown prices and the widest catalogue in the Mideast, says the website director Simon Rahmann.
The site bills itself as the region’s first integrated media shop; it will sell the full range of digital downloads, from music to mobile games, on its launch later this year.
Getmo, which has more than a million tracks, will initially sell chart tracks such as Beyoncé’s ‘Single Ladies’ for around $0.79 each. A range of singles will be available for $0.69 to mobile and net users, compared with the lowest price of $0.79 charged by iTunes. In a bid to corner the mass market the site will also feature Arabic and Indian artists, alongside Tagalug music to entice the region’s Filipino population.
“We’ll be offering different payment mechanisms to make it as easy as possible,” Rahmann says. “For users, buying legitimately like this means you get the full track and the best quality.”
The site, which represents a multimillion euro investment for Arvato, the technical partner behind the firm, will focus on snapping up more content ahead of its third quarter launch, Rahmann said.
“We have a content team of more than 50 people who do just that every single day, they update content. To be ahead of the game, you need that.”
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