Moscow-based search engine Yandex (s yndx) is hoping to steal a march on international rivals with a new music subscription app for the iPhone (s aapl) — but it’s gambling that users will be ready to stump up cash for the service in a country where paid-for digital music is rare.
With major music services like Spotify and Rdio yet to launch in Russia, Yandex plans to announce the iOS app later on Wednesday, offering users the chance to tap into its Yandex Music service and pay for the right to stream direct to their handsets or iPods.
But while the subscription proposition is fairly common among international services, it’s not the norm everywhere — and that could prove tricky.
Most music services in Russia are free, including the web-based version of Yandex Music, which launched in 2009. In order to take that service mobile, however, the company is asking people to pay 199 roubles each month (around $6) for the right stream a library of music that currently holds more than 3 million tracks by 80,000 artists over the air to their phone.
There are subscription services available locally, including Zvooq.ru, which charges $5 a month for mobile and offline access — but, like Yandex, it still offers a free web player.
Yandex, which owns around two-thirds of the Russian search market, is clearly hoping it can covert some of its 5 million monthly web listeners to go the mobile route. But even it can convince them, just 2 percent of Russians use iPhones and — perhaps more importantly — the Russian music market is relatively undeveloped, with total sales across all formats of less than $100 million for 2011.
Turning profit in a market that is heavily reliant on piracy is tough — but could prove a significant bonus for the first company to really crack the problem, as Zvooq’s founders told the Financial Times last year:
“Some people see piracy as a threat, but we see it as a ready market with tens of millions of people consuming music online. It’s an opportunity,” says Simon Dunlop, one half of the duo behind Zvooq.ru, the online music service (whose name reflects Russian zvuk “sound”).
“If you have an established pirate market, it forces you to be that much better because you are competing with the free stuff,” he says.
Still, most potential entrants are steering clear for now. While our map of the worldwide market shows that there are 13 digital music services available locally, most international players have stayed out. Only Deezer and YouTube (s goog) could really be considered global services: Spotify, for example, has no outpost in the region, despite taking a large slice of funding from the Moscow investment group Digital Sky Technologies.