March 19, 2016

Stream Wars: Is There Any Hope Left for Jay Z’s Tidal?

This article was originally published on GenFKD

A rough couple of months for Tidal culminated in the company’s satirical skewering in a recent Saturday Night Live skit. Despite support and ownership by several major artists, Jay-Z’s music streaming service is struggling to gain traction among consumers despite Kanye’s earnest efforts.

So, what’s unique about Tidal’s business model and why has it failed to keep pace with competitors like Spotify and Apple Music?
Jay-Z 2011
By Joella Marano [CC BY-SA 2.0], via Wikimedia Commons
Music industry 101
To understand why Tidal is different from any other streaming service, let’s start with some basic information about the music industry and its economics.

When you stream or download a song, there are two pieces of the song that are making money: the song itself and the recording of that song. The songwriters get paid for the song and the record label gets paid for the sound recording (this is admittedly oversimplifying things, but we did say this was just the basics). The artist gets paid a contractually agreed amount per stream or download based on their contract with the record label.

So, when a song is streamed, companies like Spotify and Apple Music owe both the record label and the songwriter money for using that song (again oversimplified). The problem is that many musicians have said that these streaming services aren’t paying very much. What’s more, when you take into account that many artists get paid only a portion of that money from their record label, it means that musicians aren’t necessarily making very much money from streaming.

Since streaming is becoming increasingly popular and has been touted as the future of the music industry, this is kind of a big deal. If musicians can’t earn a living by making music it will radically shift the nature of the music industry and put a lot of people out of work. That’s why people like Taylor Swift, who are popular enough to have a bigger say in what happens to their music, have been pulling their music from streaming services.

Jay-Z’s solution
Leave it to Jay-Z to try to solve the problem. He bought a music streaming company in January 2015 and relaunched it as Tidal. It was billed as an artist-friendly company that was owned by musicians, paid artists more, and offered high-quality audio streaming with a subscription-only revenue model — meaning free ad-supported streaming isn’t an option.

The new ownership included Arcade Fire, Kanye West Beyoncé, Coldplay, Deadmau5, Jack White, Madonna, Jason Aldean, Daft Punk, J Cole, Usher, Calvin Harris, Nicki Minaj, and Rihanna.Their goal was to increase awareness for the realities of music creation and demonstrate to consumers the necessity of financially supporting artists. Further, the service would also offer up exclusives from artists like Rihanna, Taylor Swift and Kanye West.

It’s a noble idea, but whether or not Tidal can get more money to artists, in reality, is debatable since streaming companies pay the record labels directly, not musicians.

The music store of Pablo
One of the most high-profile exclusives on Tidal has been Kanye West’s release of “The Life of Pablo.” After several changes to his release plan and numerous technical difficulties with the Tidal stream, West eventually said the album would only ever be available to Tidal subscribers.

Unfortunately, it seems Tidal exclusives may not have the intended impact of bringing value back to music: The album was reportedly pirated more than 500,000 times. The exclusive did push the Tidal app to the top of the App Store chart for a short time, but it failed to remain there after the initial excitement. In an added sting, Tidal doesn’t share any of their data with Nielsen, the company responsible for reporting music sales, so West’s album failed to make it onto the Billboard charts.

Supply versus demand?
For now, things keep getting more interesting: Just this week, Jay-Z pulled The Blueprint trilogy from all other digital music services, including as digital download in places ones like the iTunes store. Still, there’s been a string of technical issues, staff departures, and negative press, all while the service is competing with huge players that have tens of millions of subscribers.

Tidal is an attempt to limit the supply in order to create demand — by offering up exclusive music from top artists in exchange for a monthly fee. Unfortunately, the waters have been a little rough. Historically, restricting access has never worked well in the music industry and fans often find ways to gain access.

The success of Tidal after Kanye’s exclusive album release shows that, perhaps, given all of the star power behind Tidal and the opportunities for exclusives from high-profile musicians, they might be able to make this model work if they can take care of the technical issues.

On the other hand, Spotify has argued that their model is based on giving fans access to the most music and giving musicians access to the biggest audience — increasing supply to create demand. A world of exclusives is great for these services but it’s not necessarily a great economic situation for music fans who have to pay for multiple services to hear all of the music they want, much like paying for both Netflix and Hulu.

The real question in the race for survival is what do consumers want: exclusive music from high powered stars behind a paywall or free ad-supported access to most
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