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Facebook (FB) Inks Music Licensing Deal With India's Saregama

Facebook FB recently entered into a global licensing deal with Saregama to bring this India-based music label’s vast catalogue of songs to its core platform and Instagram, per a Reuters report.

While the terms of the deal were not disclosed, this partnership will allow users to add the label's music across various formats like videos, stories via music stickers, and other creative content on Facebook and Instagram. Users will also be able to add songs to their Facebook profile.

Formerly known as The Gramophone Company of India, Saregama owns the largest music archives in India with a rich catalog of over 100K songs in different genres in more than 25 languages.

Facebook’s shares have returned 12.1% on a year-to-date basis, outperforming the industry’s 11.3% in the same period, gaining from robust user growth and engagement amid the pandemic-caused disruption.

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Facebook Encourages Music Adoption

Facebook is encouraging its users to use music across its family of services. This is evident from its partnerships with global music communities in more than 55 countries.

There are more than 3 billion people actively using Facebook, Instagram, WhatsApp, or Messenger each month. This includes 2.6 billion people using Facebook alone and more than 2.3 billion people using at least one of its services every day.

Facebook had signed similar deals with three of India's top music labels including T-Series, Zee Music Company, and Yash Raj Films in March last year and rolled out its music products in the country in September last year to enable users to express themselves through music on its platform and Instagram.

The products included music stickers on Stories, the ability to add songs to Facebook Profiles and creative tools such as Lyrics on Instagram and Lip Sync Live.

Last year, Facebook introduced a feature that allowed users to listen to the full song on Spotify SPOT after it was posted on their Facebook profile. Notably, Saregama also signed a licensing deal with Spotify last month, enabling the music streaming service to offer the label's catalog on its platform.

Earlier, the company had signed a deal with Universal Music Group (UMG), allowing users to post videos with music from the record label on its platform as well as on Instagram and Oculus.

We believe that the use of music-based products may boost user engagement and Stories user base. The United States leads other countries with 120 Instagram million users at the end of April 2020 followed by India with 88 million Instagram users, per a Statista report.

Base Expansion to Boost Growth

Facebook’s growing user base is a major driver. In the first quarter, while monthly active users (MAUs) increased 9.6% year over year to 2.603 billion, daily active users (DAUs) grew 11% to 1.734 billion.

Increase in user engagement and user base is expected to drive demand for ad slots, thereby attracting advertisers. This may help Facebook at a time when Alphabet’s GOOGL Google, YouTube and Twitter TWTR are increasingly trying to dominate the digital ad space.

Facebook’s user base expanded primarily owing to the coronavirus outbreak as more and more people were compelled to stay at home. Although the spike in usage is not expected to continue in the long run, Facebook’s initiatives to make its apps more engaging are likely to help sustain its user base.

Its music partnership with Saregama is a noteworthy step in this regard as its exciting library of songs makes stories lively and engaging especially for users in India, its biggest market by user count.

Additionally, Facebook is expected to benefit from the massive spike in video chat app usage. Messenger Rooms for video call, which supports up to 50 people with no time limits on call lengths, is a timely offering from Facebook. Notably, this Zacks Rank #3 (Hold) company saw a 1000% surge in the time spent on group video calling in March 2020.

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