Tidal – Jay-Z’s $56M Buy. Or, Paying is the New Free


Moses Avalon

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?

No.

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.

Mo out

PS: I’m signing up now.

14 responses to “Tidal – Jay-Z’s $56M Buy. Or, Paying is the New Free”

  1. David Parker says:

    Mo,
    I work in the music industry for quite awhile. Can I borrow $20 a month to sign up with Tidal and keep up with you, err, I mean the Jones’s?
    Have a great April Fool’s Day.
    David

  2. Dave Lambert says:

    Excellent read for a turning, streaming and demographically split society. I, too am signing up. And pulling my music from all current freemium sites that have yielded next to nothing in the recent past.
    When Ford, GM and Chrysler have a downturn in sales or a slump period it never seems to affect Jaguar and Rolls Royce… Seems simple to me…

  3. Jason Goldstein says:

    Moses – I would love to hear your opinion on whether the royalties Tidal pays artists are really going to be any better than the Spotify/Pandora model. I’ve heard Tidal will pay twice the royalites of those services – will that actually add to up to anything that really makes a difference?

    • drblank says:

      Tidal’s costs are going to be more to deliver the content since Lossless files are larger than Lossy, and the content delivery costs are quite high if they want to deliver the content without having to buffer.

      I tried Tidal just before the Jay Z buyout, and on my ISP, which isn’t the best in the world, it was buffering constantly so I opted out since it would take me 10 minutes to listen to a 4 minute song due to constant buffering. If you have a good ISP, it’s probably going to work much better, but for me, it was unlistenable. I didn’t like the audio from Lossy compared to the Lossless files that i collect because i usually buy CDs and rip to Lossless or I buy HD Tracks. Yeah, I’m one of those people. 🙂 But I’m very careful as to what I buy because not all of the high res files are any better than the CD version and it’s usually due to a different mastering process. It’s hit and miss.

    • Dinah B says:

      Yes I haven’t heard anything about higher royalties and frankly, I thought that was the real reason “artists” were starting this service because they are tired of getting ripped off by Spotify and other such models.

      In order to get his 56 million back, I bet there won’t be much different than the other companies. What makes it different than Sirus Radio?

      Dinah B.

  4. John Luongo says:

    Hi Mo,

    He is a street thug and while he may be surrounded with smart business people this will be a bust!

    To enjoy audiophile music one must first make audiophile music and Jay-Z and most on that 17 panel board of sell outs and hand outs are not making sonic masterpieces!

    I am not a nay sayer or a doubter but you str not looking at this from the side of the Artistic community who, according to Jay-Z, only included 17 members!!

    Sorry but that is just the truth Mo!

    JL

  5. Jef Jaisun says:

    Jay-Z must be using his commission from the Robbie Cano signing.

    Yeah, like I’m going to ditch the thousands of recordings in my own collection to join bleeding edge (read: “Seriously? You’re that self-absorbed?”) quasi-retirees in a rush to add another 20 bucks a month to my exploding media bill.

    Call me when net neutrality puts everything in one Tidy package for a reasonable price. Then maybe. But probably not.

  6. Bill Seipel says:

    If someone can afford a $10,000 stereo, it stands to reason that they will probably OWN their music, rather than rent it. I don’t follow your logic here. Audiophiles I know, won’t go within 20 feet (let alone $20) of streaming services. Plus, it’s ISP dependent.
    Furthermore, If the end result of Tidal, is a high quality streaming upgrade from Spotify or Apple, at a higher cost… how does that help artists make more money? That’s what artists are bitching about. Money. Nobody is writing essay after essay about how much the sound quality sucks on streaming services. Everyone talks about the money that isn’t going to artists.
    And what good does that do, if your service pays artists better (do we know the payout metrics for Tidal yet?) but your only market, is 40+ audiophiles.
    Tidal is a waste of space.

  7. drblank says:

    I wouldn’t compare HD Tracks to Spotify or Tidal because they don’t stream music, they sell digital downloads and they cater to “audiophiles’ and audiophiles typically have lots of money in expensive equipment and huge catalogs of music so each person probably collects a lot of content they are itching for. But I haven’t seen their financials.

    ALL streaming music sites, Spotify, Tidal, Beats Music lose money. Here’s the financials for Aspiro, Tidal’s parent company. note the losses.

    http://markets.ft.com/research/Markets/Tearsheets/Financials?s=ASP:STO

    The focus for these companies has to be the bottom line first, if they can’t survive, then they either sell off to someone else, or they shut the doors down.

    NetFlix, on the other hand is profitable, even at a paltry 5% Net Profits to Gross Revenues, but that’s probably largely due because they signed blanket agreements and they apparently don’t pay per movie stream so their costs are a lot less.

  8. Chuck Zwicky says:

    Excellent piece, Moses..!!

  9. This sounds exciting and is very encouraging. Let’s hope that they will pay better royalties than the other platforms. That is what in my opninion will make a difference.

  10. Steve King says:

    Well said Moses! 🙂

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