Zvooq raises $20M to bring freemium alternative to Russia's pirated music sites

Music piracy is still a big problem in Russia. Russians consume a lot of music, but much of it is grabbed from social sharing sites and not paid for.

Russians paid for only about $61 million in music during 2013, according to industry association IFPI, but that number should be a lot bigger. Russians listen to enough music to put the country in the top 10 worldwide in download and streaming subscription revenue if more of the music was paid for, experts say.

Zvooq is one of Russia’s largest paid music sites, with over 15 million songs from over 500,000 artists in its catalog. The service competes with Russian market music sites Yandex and Trava, and with global services iTunes and Deezer.

Zvooq is now trying to sell a white label version of its service to other Russian content sites that might otherwise host pirated music. The company’s plan is to offer a streaming service to Russian social sites and mobile carriers that streams music for free, as Russians are accustomed to, but intersperses the steams with ads.

“Zvooq’s mission is to bring a quality music listening experience to anyone with a mobile or Internet connection across emerging markets” said Zvooq co-founder Victor Frumkin in a statement. “Integrating Zvooq is a way to monetize music for the masses and give consumers legal music where they want it. This is the first real alternative to piracy in these markets.”

Streaming services made up 56 percent of Russia’s music industry growth in 2013.

To fuel the marketing of its new white-label offering, Zvooq just closed a $20 million funding round led by Russian e-retail giant Ulmart. The Helsinki-based venture capital firm Essedel Capital also kicked in.

One of the sites Zvooq might try selling its white-label service to is Vkontakte, Russia’s second largest site and a popular place where Russians go to “share” music. Three record labels — Sony Music Russia, Universal Music Russia, and Warner Music UK — recently filed suit against Vkontakte, alleging “large scale” music piracy.