Tidal – Jay-Z’s $56M Buy. Or, Paying is the New Free
My mind is spinning with the myriad “experts” who think Jay-Z is a moron for buying a streaming service that has no ability to compete with existing players. Nothing could be further from the truth. In case you are just tuning in, Tidal is a premium grade high-resolution music streaming service for which Jay-Z just paid $56 Million. Think of it as Spotify for audiophiles. Is this a new concept?
HD Tracks, a Manhattan-based company, has been successfully catering to this market for years. And Apple with its purchase of Beats (which was a slightly higher bandwidth streaming service when it was called MOG and run by audiophile David Hayman) clearly has an eye on this market as well. Tidal, however, is the first to design a streaming product specifically around those people who think music is not a commodity, like salt but rather an extension of your lifestyle choices– like your car, your home and your clothes. Namely, Baby Boomers and Gen Xers—the folks who built the music industry as we know it. Millennials will no doubt ignore Tidal and continue to use the free versions of Pandora, and Spotify, until the paper woofers in their designer headphones tear. But for those who’ve edged past 40, who’ve become more attached to their tastes and whose stereo systems have evolved past computer speakers—and that community is many millions of Americans– they will gladly pay a mere $20 a month to have groups like Miles Davis, Steely Dan, the Beatles, and Yes streaming into their $10,000+ home entertainment systems in hi-def resolution that Pandora and Spotify can’t come close to on their best day.
Is Jay-Z crazy? No. What amazes me in how Freetards love to throw around the term “low hanging fruit” when describing technology plays, and yet completely ignore its converse– that in order for there to be low hanging fruit there has to be… high hanging fruit. And them apples and oranges spend lots of cash. Facebook figured it out. They do not care about the diminishing involvement of broke millenniums on thier network because they figured out who is really worth advertising towards. Old farts. That’s’ why their stock has doubled in a year. The biggest and most successful internet site in the world figured out that catering to people who want everything for free is not profitable. Groundbreaking!
To grow their business Tidal does not have to pay attention to which freeium service has a more market share. They only need know to one metric—how many people in the US turn 50 each day. According to the U.S. Census Bureau, that number is 10,000 people– every single day. If Tidel can grab even 1% of that market they will pass 360,000 paying members this year. At $20 per member, per month it comes too… a lot. More than enough to justify Jay-Z’s costs.
Freetards say “music fans” (whatever that means) won’t pay. They maintain that they’re very happy to listen to MP3 quality tracks on ear buds. But such people would (or should) argue that Mercedes-Benz, BMW, and Audi are also foolish for offering luxury cars. Or that Tesla can’t compete with Prius. Why pay for any of them when you can get a Volkswagen for a quarter of the cost? Or ride the bus for $2. The answer is simple: because we live in a two tier world: the proletariat, who fly coach and eat Pho; and the bourgeoisie, who like to pay more to get more. Sometimes they are true connoisseurs and sometimes they just want to reward their success by feeling superior at class reunions. Regardless, Tidal will have a market. It will be the smallest streaming market, but the one that makes advertisers the happiest. Does that mean it will succeed?
Unfortunately, the fact that they have a great product and a consistent demographic is a guarantee of nothing. Especially once it’s clear that their business model works. Then companies like Apple will shift into high gear and stampede over them. Yes, there’s little doubt in my mind that Apple will be launching a two-level streaming service via Beats soon. Spotify will follow and soon Tidal will be surrounded by competitors of ravenous determination. But in the process something clear will be established.
Music will once again have value. We live in a world were kids think music should be free but they will gladly pay $4 for a bottle of water. That must change.
Tidal is the next brick in that wall. Jay-Z is an innovator with his involvement. He’s trying to send a message– music is important. Artists should support him. Music fans who can afford it certainly will.
And as for the critics who sit behind a computer all day dreaming of getting to second base and blog that everything will fail and the music business is doomed, why don’t you just stay on the 128K side of the tracks and free up bandwidth for those of us who still care about what comes out of our speakers.
PS: I’m signing up now.