Tag Archives: Tidal

Tidal – Washed up already?

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Just over two weeks after its star-studded press conference, Tidal has fired 25 employees including CEO Andy Chen. This is a clear red flag; its re-launch was supposed to establish a new direction and the fact that the CEO has already been replaced by someone with a ‘clear vision’ shows that Tidal is in disarray. What exacerbates the situation is that Chen will be replaced by Peter Tonstad, former CEO of Tidal’s parent company Aspiro – if Tonstad has such a ‘better understanding of the industry’, why was he not made CEO prior to the re-launch?

Why would a company that has just embarked on a new direction embark on another new direction with new personnel? The answer is simple: Tidal is not connecting with the market.

The Numbers

Three weeks after re-launch and Tidal has crashed out of the top 700 apps in the US iPhone download chart. It had some initial success climbing into the top 20 downloaded apps, but any traction that it gained has now been lost. That said, there has been some suggestion of corporate espionage with Jay Z tweeting that ‘there are many big companies that are spending millions on a smear campaign’ and unofficial sources have stated that Apple has manipulated Tidal’s download numbers by being slow to approve the app’s iOS updates. It might therefore be fairer to check the numbers on Google Play Store. At the time of writing, Tidal is not within Play Store’s top 540 downloaded apps and it does not appear unless you manually search for it. In comparison, Spotify is Google’s 7th most downloaded app.

In his #TidalFacts Twitter session, Jay Z said that ‘Tidal is doing just fine’, that it has over 770,000 subscribers and that it has only been in business for one month. However, he failed to mention that it already had 550,000 subscribers prior to the re-launch. Disregarding whether these new members are people using the free one month trial or if they are early adopters who have anchored themselves to the platform, it must be noted that each of these artists can generate more sales figures in the first week of their solo albums than what Tidal has achieved in a month. There has therefore not been a conversion of fandom into membership.

Meaning of the Numbers

Yes it is just the first month of business for the revamped Tidal, but it is clear that consumers have not warmed to the platform. In an economy of price-conscious and value-driven millenials, consumers find no appeal in Tidal giving artists more money in exchange for expensive subscriptions, little exclusive content and lossless audio that only those with specialist equipment can truly appreciate.

Tidal is tailspinning into irrelevancy. It needs to change, but it will not offer a free subscription model because that would defeat its purpose. An exclusive Jay Z and Beyonce album could prevent Tidal from becoming washed up, but how will it fare when the pirates get their hands on the booty?

What Next?

Although it markets itself as a niche product, the fact that Jay Z compared Tidal’s valuation to the valuations of Apple, YouTube and Spotify shows that it wants to compete with the key figures in this industry; 16 of the world’s most renowned artists holding equity in Tidal also betrays its image of being a specialist service. Therefore, to compete with Spotify or another similar service, it must become more consumer-friendly. It currently adds no value, or at least not enough to detract a significant number of customers away from services which do offer a free membership.

The vital move would be to change its pricing strategy and offering a free membership would be most beneficial. On the face of it, this seems like it would defeat the purpose of Tidal, which is to give artists more ownership over their work, but do not forget the star power that the company wields. The advertising revenue that could be generated in a move into adtech to subsidise the free memberships would be extremely significant and the idea is that Tidal could scale up advertising fees alongside its growing membership. This is a long term strategy that could work but the artists would need to all buy in to the system for maximum effectiveness.

Another very promising feature would be to expand on the exclusive content, not just the music but on concerts and sporting events, as indicated by Jay Z’s recent tweets. To give consumers an experience truly distinct from its competitors, broadcasting live events for a one off fee in cinemas would be a novel way of moving far beyond what Spotify, Pandora etc currently do. A consistent schedule of live events would generate the excitement that the initial re-launch press conference warranted.

With the streaming market becoming increasingly competitive, Tidal also needs to bear in mind that the European Commission is currently investigating the competition aspects of a joint venture between German, UK and Swedish collecting societies (the bodies that manage copyrights in music on behalf of their members and who also licence the works out to companies like Spotify). If such a joint venture is successful, its dominance could increase the prices that streaming services pay which will ultimately benefit the artists and take away from the purpose of Tidal. Increasing membership and generating revenue so as to reduce the purchasing power of Spotify would protect Tidal’s position and, granted Tidal is still in its infancy, if Jay Z is honest about the company being in it for the long haul, this is certainly something that it needs to consider.

Conclusion

Despite what Jay Z says, it seems that the market is in agreement that Tidal is about the artists and not about the consumers. That is fine. Tidal is a business and it is supposed to benefit its stakeholders, but it must make itself more appealing to the customer and what it absolutely cannot do is continue with this current pricing strategy.

For more information, please do not hesitate to contact me.

Tidal – A Sea Change in Music Streaming?

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Aspiro was acquired in January this year for $56m and is now worth $250m thanks to the relaunch of its subsidiary streaming service Tidal. 15 of the world’s biggest artists each own 3% equity in Tidal with Jay Z, another investor and record labels owning the rest. However, despite its star-studded New York conference, Tidal exists with an inherently flawed business model in a market that will only become more competitive.

Why does Tidal exist?

To understand the reasoning behind Tidal, it is important to understand why content streaming exists. As a very brief background, the widespread availability of the internet in the 2000s allowed for the heavy piracy of mp3 files whereby downloaders uploaded and downloaded content without payment. With the development of faster internet speeds, this led to huge losses by the record labels and, out of what seemed to be their ashes, arrived the legal streaming services. The key streaming platforms include Spotify, US-based Pandora, Deezer, YouTube and the upcoming Beats and YouTube Music Key.

Although these streaming services do generate revenue, their profit margins are low and artists have complained that the little royalty fees that they receive dilute the value of their music. As an example, Taylor Swift notably removed her discography from Spotify in protest in 2014. It is within this context of artists’ dissatisfaction that Tidal exists. Under the guise of providing lossless quality music and exclusive content, Tidal addresses artists’ concerns by placing control back in their hands with a paid-subscription model.

What are Tidal’s flaws?

Tidal’s business model is inherently flawed because of its strategies regarding high pricing and exclusive content. The highly competitive streaming industry is also not conducive to Tidal’s success.

The service’s concessions to the artists come at the expense of consumer satisfaction. Unlike YouTube and Spotify which offer free ad-based content, Tidal’s membership options are fixed at $9.99 and $19.99 for standard and lossless quality music respectively. The high costs are unappealing to the average consumer who can use alternative free services and the lossless quality option will only be appreciated by audiophiles with specific equipment. These high price points also go against the very reason why streaming is so popular – streaming was born from piracy which is itself a product of people being innovatively frugal. As a result of how much it costs, not only will consumers not be attracted to Tidal but fears that this will lead to an increase in piracy may eventually come to fruition.

Without free memberships, Tidal promises exclusive content in an attempt to allure consumers away from other services, but it is doubtful how much this will compensate for the service’s pricing strategy. What sort of content will be exclusive – a song, two songs, a whole album? As much as these artists may love creating and sharing music, they are in a business driven by sales. If an artist produces an album exclusive to Tidal that can incur costs in the millions, this limits the amount of investment that can be recovered to just the income from Tidal’s membership fees. This is absolutely unsustainable and it is far more profitable to release an album to the masses. It is therefore more likely that exclusive content will be in the form of a standalone songs and it is very doubtful that a significant number of consumers will care enough about this exclusive content to subscribe to Tidal.

Rather than its competitors needing to be worried, Tidal should be extremely concerned about what is happening in the market: i) Spotify will soon be raising $400m from investors including Goldman Sachs and the Abu Dhabi Sovereign Wealth Fund, thus valuing the company at $8.4bn (33 times more than Aspiro); (ii) YouTube, one of the world’s largest social media platforms, is preparing to launch its own paid subscription membership; and (iii) Apple, with over 500m credit card details and also currently negotiating with artists for exclusive content, is also expecting to relaunch the Beats platform this June. Competition is drastically increasing and, though there is money to be made, the increasing competition will decrease the potential for profit which may eventually price Tidal out of the market – yes it may be the more glamorous option, but it lacks the financial infrastructure of a Spotify, YouTube or Apple that is required to withstand consumer pressure.

Had Tidal entered into the market earlier, the streaming landscape would be dramatically different. However, it is currently in an industry that is nearing saturation with consumers’ memberships being fiercely fought for.

Conclusion

Unless it drastically changes its model to include a free membership option, Tidal will not become a key provider of content. If it does vary its pricing strategy then it defeats the very purpose for which it was created (to provide artists’ with more control and a higher return on their music) which may ultimately result in artists’ removals of content. The increasingly fierce competition will also add pressure on Tidal and its future looks bleak. Granted it is still very early on its life, but its inherently flawed model will not institute the sea change in music streaming that its star-studded entrance suggested.

For more information, please do not hesitate to contact me.