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Facebook Inc (FB) Will Suffer Great Losses If It Ever Attempts to Stream Music

Facebook Inc NASDAQ:FB

Facebook Inc. (NASDAQ:FB) made the news today when it revealed that it wasn’t planning to enter the music streaming space. On July 1, The Verge had reported that multiple sources had told Music Ally that Facebook was planning to enter the music streaming space. That was shortly after Apple Inc. launched its own Apple Music service.

Facebook Inc NASDAQ:FB

Facebook debunked all those rumors about its interest in the music streaming business today. The Inquirer reports that a Facebook spokesperson said that the firm “has no plans to go into music streaming.” Facebook’s decision to avoid music streaming is smart. The firm is not likely to succeed if it entered the music streaming business in the first place. Below are three reasons Facebook will fail woefully if it enters the music-streaming business.

Facebook’s Users are Dispersed Globally

At the end of the second quarter of 2014, Facebook reported that it had 1.317bn global Monthly Active Users (MAUs). Of those 1.317B users, 204M or 15.49% of users are in the United States and Canada. 292M or 22.17% of Facebook users are in Europe. 410M users or 31.13% of Facebook’s users are in Asia. 411M users or 31.20% of Facebook users are in the rest of the world – that lumps users Africa, Australia, and the Middle East together.

Now, if Facebook wants to market its music streaming service to reach out to its global audience, it would need to do tons of deals to get enough artists on its platform. Some artists might have a global brand; nonetheless, the preferences of people in Asia, Europe, U.S. & Canada, Australia, Africa and the Middle East will be very different. And that’s discounting the language barriers of finding local content producers.

Asia is a Hotbed for Piracy – Subscription Fees are Alien

Now, even if Facebook is able to attract enough artistes to cater to the music preferences of its global audience, the firm is not likely to see decent returns on the investment especially in Asia. Asia is a  hotbed for piracy and it is doubtful that the people would be ready to pay to stream a song if they could find a way to download it. Hence, the endemic nature of piracy in Asia suggests that there’ll be little subscription revenue coming from that region.

Most Africans Don’t Have Enough Money or Bandwidth to Stream Music

If Facebook succeeds in getting a global pool of musicians and it encourages Asians to pay their subscription fees, Africans won’t pay up because they simply don’t have the money. The World Bank reports that 46.8% of people in Sub-Saharan Africa live on less than $1.25 per day. For those people, paying $9.99 to stream music per month is simply out of the question when there’s no food on the table.

Now, even if Facebook offers its music streaming service at no cost for Africans (probably to obtain ad revenues) most of them still won’t stream music because the mobile Internet connectivity is not strong enough to support such loads.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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