Melon falls to No. 3 as Spotify surges on Naver membership tie-up

South Korea's music streaming market is rapidly reshaping itself around foreign platforms.

When Google launched YouTube Light — a stripped-down plan without YouTube Music — following a Korea Fair Trade Commission ruling that bundling YouTube Premium with its music service constituted tying, many expected domestic platform Melon to benefit. Instead, Melon slipped to third place, with Swedish platform Spotify quickly moving up to claim second.

Industry insiders attribute the shift to Spotify's partnership with Naver, saying Naver Plus membership has been pulling in a large share of domestic music listeners.

According to monthly active user (MAU) data for June released Tuesday by market research firm WiseApp·Retail, YouTube Music led with about 9.49 million users, followed by Spotify at about 6.22 million, Melon at about 5.93 million and Genie Music at about 2.37 million.

The figures mark a new low for Melon, which lost its top spot to YouTube Music in 2022 and has now been overtaken by Spotify as well.

The Korea Fair Trade Commission had earlier ruled that Google's bundling of YouTube Music with YouTube Premium constituted tying, prompting Google to launch YouTube Light — a plan that excludes YouTube Music. Many in the industry had expected Melon to be the primary beneficiary.

Music streaming platforms scrambled to capitalize on the opportunity, rolling out revamped services and a mix of online and offline events to attract users. Melon was no exception.

But no turnaround came. Industry observers say Naver's membership platform proved to be the decisive factor.

In practice, Melon's MAU fell from about 6.37 million in June last year to about 5.93 million this June, dropping below the 6 million mark. Over the same period, Spotify's MAU grew from about 3.89 million to about 6.22 million. The surge followed Spotify's partnership with Naver in November last year, when its premium basic plan was added to the Naver Plus membership.

YouTube Music's MAU also declined over the same period, from about 10.44 million to about 9.49 million, suggesting that users migrated to Spotify not only from Melon but from YouTube Music as well.

The developments put Kakao in an awkward position. The company acquired Melon in 2016 for 1.87 trillion won ($1.28 billion), and criticism is mounting that the deal has turned out to be a poor move, especially given the limited synergy with KakaoTalk. Melon's sales in Kakao's content division fell from 525 billion won last year to 485 billion won.

"Partnerships with Naver's membership platform are having a significant impact on other platforms — Spotify and Market Kurly being prime examples," an industry official said. "If a service is not already an established platform with a dominant market position, Naver's membership platform has become powerful enough to determine industry rankings."