Members of Big Toe crew from Vietnam perform during the first part of the "Battle of the Year", an international competition of breakdance (Boty), in Montpellier. Photo: AFP/Anne-Christine Poujoulat

Music has played an important part in Vietnam’s war history, the development of its tonal language, and now maybe its economic evolution, too.

The arrival of Swedish music streaming company Spotify hints at broader changes afoot in Vietnam, which is rapidly adapting to and seizing opportunities in global technology developments.

The communist nation became Spotify’s eighth Southeast Asian market, and lifted to 60 the total number of countries where it sells music streaming services worldwide.

It’s big business: The We Be Social and Hootsuite digital report estimated consumers spent US$11.2 billion in 2017 on digital music streaming worldwide. Market leader Spotify had 71 million premium subscribers by the end of 2017 amid a global push into developing countries.

“As we come into Vietnam today, we made sure that we have a diverse catalogue of international music and local Vietnamese music,” Sunita Kaur, Spotify’s managing director for Asia, said this week at the service’s launch in Ho Chi Minh City.

As part of the pitch, Kaur unveiled a clip of musicians from around the world wishing Spotify well as it enters the Vietnamese market, from the K-pop duo MXM, to the local female rapper Suboi, who dropped some bars for US president Barack Obama when he visited Ho Chi Minh City in 2016.

Spotify is fast expanding around the world ahead of its April 3 New York Stock Exchange listing, estimated by analysts to be one of the world’s biggest in 2018. While its revenues grew 39% to US$5.4 billion in 2017, Spotify continues to lose money.

The company’s core question, i.e. can it convince global customers to pay for something they are used to getting for free, is as relevant in Vietnam as other global markets. But if Spotify is targeting developing markets with disposable income and music mania to bridge the gap, Vietnam has both in abundance.

An earlier generation of musicians made their names in the crucible of war, calling compatriots to arms or mourning lovers killed in battle. Today, the Vietnam War is no longer front of mind, but music is everywhere.

Music lovers carry portable karaoke machines around with them for mobile crooning, while aspiring musicians often idle away afternoons at cafes strumming on their guitars. Storefronts across the country blare music to announce grand openings or sales.

A rapidly rising middle class means Vietnamese are increasingly geared to spend. Many in the young workforce are getting richer but continue to live with their families, meaning money that would go to rent is spent instead on conspicuous consumption, from Xiaomi smartphones to exotic weekend excursions to places like Myanmar.

What is less clear is whether Vietnamese consumers will spend for Spotify’s digital services. Downloading free files, from songs to movies to software, is a way of life in Vietnam.

So much so that the country has a recurring spot on the United States Trade Representative’s (USTR) annual ‘watch list’ of global nations notorious for intellectual property violations.

The situation is changing, however, which may have contributed to Spotify’s decision to take the plunge into Vietnam. In 2015, for example, the USTR removed Zing.vn from its watch list after the Vietnamese music portal moved to license content.

“We see the government continuing to invest in intellectual property protection, with its score increasing every year,” said Kelly Anderson, senior manager for international intellectual property at the US Chamber of Commerce (CoC).

She notes the improved score Vietnam has earned on the CoC’s Global Intellectual Property Center index, which rates countries according to how strictly they protect patents, trademarks, and copyrights.

Google and Singapore sovereign wealth fund Temasek estimated in a report last year that Southeast Asia’s digital economy would grow six-fold to US$200 billion by 2025.

While Vietnam is still largely a cash-based economy – notably without the high levels of consumer debt in credit card-addicted nations like the US, Australia and South Korea – e-commerce is quickly picking up, with many Vietnamese entrepreneurs setting up digital shopfronts on Facebook and other social media platforms.

Spotify also faces challenges from market incumbents, including China’s JOOX, which has made strong inroads into other regional countries and accounts for around half of the region’s music downloads. JOOX has successfully expanded in Southeast Asia by localizing its music content.

How quickly Spotify adapts to local tastes and trends will likely determine how successful it is in convincing Vietnamese to pay for the music that is already all around them.

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