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April 5, 2015

Jay Z Tidal Wave

On Monday evening, hip-hop mogul Shawn Carter – better known as “Jay Z” – broke new ground in the fast-growing, ever-evolving digital music industry by launching the first-ever artist-owned music-streaming platform: Tidal.
I must admit, when I first heard the news, I thought, “Here we go again. This has already been done.” After all, we already have Spotify (my personal favorite), Pandora (P), and Rhapsody. Not to mention, after buying Beats Electronics last year, Apple (AAPL) is also looking to release a new music-streaming service in an updated iOS music app that it’s currently developing.
Far from being a publicity stunt, though, it’s a bold business move that could mark the beginning of a new and unique era in the music-sharing industry, linking artists and fans in a way that’s never been done before.
Much of that uniqueness comes from an extraordinary collaboration. Jay Z’s co-owners/investors include several highly influential music icons – including Madonna, Beyoncé, Daft Punk, Jason Aldean, and Coldplay’s Chris Martin, to name just a few.
So if you think for a second that this is just another run-of-the-mill streaming platform, you’re dead wrong!
That’s why I’m putting Spotify, Rhapsody, and Pandora (plus investors) on high alert…
Streaming Saturation

Streaming music is nothing new. Frankly, any newcomers are entering an already-crowded industry, and have a tough job distinguishing themselves.
For example, here’s what Spotify, Pandora, and Rhapsody all have in common:
Commonality #1: Pay-to-Listen Options. In this regard, all three companies have similar options.
Spotify offers three memberships: free, unlimited ($4.99/month), and premium ($9.99/month). The more you pay, the more features you have access to.
Subscribers to Pandora (prior to May 2014) shell out $3.99 each month. While members post-May 2014 pay $4.99 per month.
Rhapsody also sings a very similar tune. The company offers a 14-day free trial, then just $4.99 per month. For more features, it’ll cost you a buck for the first three months, and then just $9.99 each month.
Commonality #2: Massive Followings. As of May 2014, Spotify had more than 40 million active monthly users, including 10 million paying subscribers.
As of October 2014, Pandora had a total of 81.5 million active listeners of the 250 million registered users that it boasts.
Meanwhile, Rhapsody announced that as of July 2014, it had two million paid subscribers globally.
Commonality #3: Ads, Ads, Ads. This is the other common denominator with music-streaming platforms. The free versions are often bombarded with ads and commercials. It’s a win-win for them, though. Not only do they receive money from advertising, but many users opt to upgrade and pay higher subscription rates in return for not receiving any advertising.
With the competitors in this industry all starting to look a lot alike, you can see why some newcomers might feel discouraged from jumping in – they don’t want to drown in an already-oversaturated market.
So Tidal is doomed from the beginning, right? Not so…
Here’s why Tidal isn’t really a “newcomer.” In fact, it’s already managed to freeze out the competition completely.
An Entirely New League of Its Own

Many music artists are irate that they’re not properly compensated for digital music rights. And with the streaming services cornering the market, music downloads seem to be dwindling.
Take Taylor Swift, for example. Last year, she pulled her entire catalog from Spotify.
But as an artist-owned platform, Tidal provides a crucial feature that other competitors simply don’t have. And if you’re a Taylor-ite, her catalog is available on Tidal.
Indeed, one Tidal representative confirms that the company has deals for rights with all major record labels. And in return for promotional support, Tidal is offering a mix of stock and cash to its owners, which doesn’t include rights to the music, per the Financial Times. I’m not talking chump change, either. According to the report, one partner was offered $3 million for a 3% stake.
And Jay Z isn’t just launching Tidal for the benefit of his artist friends. It’s for you, the listener.
As Alicia Keys (one of the other celebrity co-owners) said: “We want to create a better service and a better experience for both fans and artists. That is our promise to the world. Our mission goes beyond commerce, it goes beyond technology. Our intent is to preserve music’s importance in our lives. Music is the language of love, laughter, of heartbreak, of mystery.”
Here’s how they plan to do that…
Thanks to Jay Z’s deep connections, influence, and credibility in the music industry, rumor has it that Tidal could release exclusive music (including high-fidelity videos) to subscribers only!
In fact, his vision is that the platform will serve as a direct liaison between the music artist and fans, enabling artists to release music to Tidal as quickly and frequently as possible.
Audio Bait
This isn’t the first time that a company has used unreleased music as bait for new subscribers.
In July 2013, Samsung (SSNLF) ran a promotion in which new Samsung Galaxy purchasers received Jay Z’s Magna Carta Holy Grail album for free. The promotion was a success.
So imagine your favorite artist releasing his newest music video exclusively to Tidal. I love the idea, and I’m sure music lovers will, too.
In fact, Tidal already has a total of 17,000 subscribers… and growing. The platform is a game-changer, as no other platform offers this, and is some serious food for thought for Spotify and the others, who’ll really have to rethink their business strategy if they want to keep up. And Apple may have to start from ground zero before getting its streaming service rolling.
In terms of pricing, the premium service runs for $19.99 per month and there’s also a $9.99 per month option, with lower-quality sound. No Wi-Fi? No problem. Subscribers can listen offline, too (to as many songs as their device can hold).
But aside from the model and pricing, what’s next for Tidal?
“On to the Next One…”
From an investment standpoint, Tidal obviously isn’t a public company. Yet. But it is the offspring of Project Panther Bidco – another outfit owned by Jay Z. Earlier this month, the company acquired more than 90% of Swedish streaming-music firm Aspiro AB (ASP.ST) for $54 million.
Aspiro shares spiked by 900% on Tuesday morning, as news of Jay Z’s Tidal project broke. If this is any indication of Tidal’s future, it’s certainly worth keeping an eye on its progress in the streaming-music industry.
If you’re interested in checking out Tidal, it’s currently offering a 30-day trial. And don’t forget to let me know how you like it by commenting below.
Where innovation meets investing,
Courtesy By Nikia Wade, Technology Correspondent, Wall Street Daily (EconMatters article archive Here

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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