Jay-Z just made his much hyped entrance into streaming official with his star studded but awkward signing ceremony for TIDAL. Once having navigated a few objections from minor shareholders, Jay-Z’s first major act after successfully buying the not-very-appropriately-named-for-a-hip-hop-superstar WiMP was to rebrand it to TIDAL, the name that WiMP’s high quality service had been operating under. Jay-Z is unashamedly bringing his superstar power to bear to make as big a splash as possible, but once the tidal wave of hype has subsided will there be enough to transform the market?
On the surface Jay-Z did not get too much for his $56m WiMP TIDAL acquisition: a streaming provider that actually lost 11% of its subscribers last year, of whom 77% are tied up in telco bundles and that has a total global subscriber market share of about 1%. The much vaunted TIDAL part of the company as just 17,000 subscribers.
But of course the deal was never about what WiMP has done to date, it was an instant entry point into the streaming music landscape. It is the streaming equivalent of buying a plot of land that has already been granted planning permission, with the slight convenience of the previous owner already having started building a little edifice in the corner of the plot. Now Jay-Z is clearing the site and laying the foundations for a construction of far greater ambition.
One of the problems with streaming music services to date is that they have generally lacked personality. This is a combination of being technology led, having to be all things to all people and having to keep the big labels happy. Jay-Z is shovelling bucket loads of stardust on TIDAL, leaning on his superstar contacts help get the launch off to a star studded bang and even making them shareholders. But it will require much more than the support of a few music biz a-listers to make TIDAL a success:
- TIDAL is creating an aspirational, premium streaming brand: In many respects TIDAL is filling the aspirational music brand space that Beats vacated when it was acquired by Apple. High quality audio and video editorial (powered by the RADR division of TIDAL) are a natural fit with this positioning. Most consumers do not actually care that much about high quality audio (only a fifth consider it an important part of a music services) and even can actually tell the difference. But that’s not the point. This is about aspiration. Just in the same way that most Beats customers buy the headphones because they represent quality rather than because of their frequency response ranges. $19.99 is not meant to be a mass market price point. It is streaming bling for those who want people to know they have the best.
- TIDAL wants to be the HBO of streaming music: One key differentiation point for TIDAL is an exclusive first streaming release window for artists. What they’ll get in return is unclear, and it certainly won’t halt the decline of sales, but it nonetheless creates a clear perception of value to artists and to subscribers. It helps solidify TIDAL’s positioning as a premium brand, the streaming music equivalent of HBO.
- Even TIDAL can’t fix the underlying problem with royalties: One of the big issues surrounding streaming is the fact artists and songwriters do not feel they are earning enough. Yet with 80% of subscription fees heading back to rights owners there is clearly not much scope for increasing the payouts. Even doubling the subscription price (on the $19.99 tier) only means artists are getting paid (at best) in double cent increments rather than single cents. The underlying dynamics remain the same i.e. you need a lot more people streaming an album to make the same money you would from selling it. In fact, you would require roughly 15 as many people, listening an average of 5 times each.
- A next generation label: Somewhere down the line TIDAL might follow Netflix’s lead and start creating TIDAL Originals, signing artists directly. Doing this would present a whole set of ways in which TIDAL could start to experiment with generating more value for artists. But it would also put TIDAL in a difficult position. Right now TV broadcasters are starting to reassess their relationship with Netflix because now it is competing directly with them for shows and talent. Netflix has bought itself some time by dint of being such a valuable revenue stream for TV companies, but the more it pushes its own content, the more TV companies want to clip its wings. Expect the same scenario to play out for TIDAL if goes this route.
TIDAL is a welcome addition to the streaming space and brings some much needed star quality. But the path ahead is far from clear. Jay-Z will need all the luck and superstar support he can get to make waves with TIDAL.