Wall Street Journal reported late last week that Apple has begun talks to purchase Jay Z’s Tidal streaming service. Since launching in early 2015, Tidal has shaken the streaming world, for good or bad, but ultimately solidifying itself among the new ‘big 3’ of music streamers, along with Apple Music and Spotify. No details about a potential deal have been released, but many questions about the future of music streaming have been promoted from the speculative talks.
Why would Apple want to buy Tidal?
Tidal currently holds around 4 million subscribers with Apple Music sitting around 11 million subscribers, according to WSJ. This means the two services combine to reach half of Spotify’s 30 million paid monthly user base which is still a fraction of the 70 million monthly free users it services. Even with Tidal under its wing, the balance is still heavily shifted in Spotify’s favor, so the question remains – why bother?
Tidal’s 4 million subscribers are important, though they are not the company’s gold nugget. For many music streamers, two of the most painful words over the past year have been “Tidal Exclusive” and that’s exactly what Apple is hoping to acquire.
What is exclusivity?
Exclusivity isn’t a complicated thesis and if you’ve tried to stream Kanye’s The Life of Pablo of Chance The Rapper’s Coloring Book upon release, you’ve experienced its essence firsthand. Music streaming is bigger than album purchasing/downloading. When a major artist drops new content, the royalties generated from streaming are now taken into careful consideration. A company having exclusive rights to the sale of a music project is not something with strong precedence in the music industry but it’s not hard to see why Apple is investing in it so heavily.
Even the botched TLOP release still managed to become the first number 1 album with the majority of its units generated by streaming, a clear sign of the direction of future major releases – especially artists committed to Tidal’s team. Corporate and record label distributors are becoming less essential to the commercial success of an album and streaming royalties have been largely collected by Spotify over the past decade with little competition – something exclusivity is beginning to change.
Why are Tidal’s 4 million subscribers important?
Tidal’s subscribers are important and not just because a few of them may be reading this. Before Tidal’s launch in 2015, the conversation of streaming deals were beginning to sprout, with artists being offered sums of money for their streaming rights since it was still ultimately theirs, or their label’s, decision where the project would be distributed. Jay Z isn’t your average Mark Cuban business investor and his role in the music industry is a bit unique. In an act that somewhat feels like insider trading, the superstar artists that got together for Tidal’s awkward launch turned down future streaming deals and decided to invest in themselves, or rather the united power of themselves. As “artist-owners” they committed their future streaming rights in exchange for stakes in the company which would ultimately possess an exclusive rights grail including: Beyonce, Kanye, Rihanna, Nicki Minaj, Daft Punk, Calvin Harris, Arcade Fire . . . you get the point.
The 4 million subscribers Tidal has gotten since 2015 shows the value of that decision. Regardless of what it wants you to think, Tidal hasn’t gotten its subscribers through its $20/month hi-fi streaming package. Through the smoke and mirrors, the only difference between Tidal and industry-leader Spotify, is the ensemble of committed artist-owners – whose exclusivity is currently valued at 4 million plus growing subscribers. That valuation may be worthwhile to Apple, taking into account that only around half of the artist-partners have released albums since committing to Tidal.
But what about Google Play?
They’re pretty much just along for the ride at this point. Sorry Android users.
What will the future look like?
Apple acquiring Tidal is still far from a done deal. If Apple is willing to dish out $3 billion for Beats Music, it’s likely that a sum of money, which satisfies Jay Z and his equity-holding artist-owners, could be negotiated. In the end this may have been Tidal’s goal from the beginning. Assuming a deal gets done, all major foreseeable streaming exclusives will be through the platform and if you have any plans on listening to Drake, Kanye, Beyonce, etc. projects when they are dropped, you’re going to need an Apple Music subscription.
That’s only one subscription, which is good – right?
One subscription – yes. Good – yet to be determined. The previous and current year of streaming exclusives may have been one of the worst periods ever to be a music consumer. Apple tried to wrestle with artist exclusivity, creating the headache-inducing process of trying to listen to releases at the time of their drop– crazy, right? The dust may settle a bit and if you believe in Apple Music, you may only need its subscription to stream exclusive releases and the rest of your music library, for $9.99/month.
But what if I’m one of Spotify’s 30 million subscribers or 70 million free users?
Strap in. Within the past week alone, the crosshairs have focused on Spotify. Apple has already blocked a new update of Spotify’s app on the App Store which would have allowed users to upgrade to Spotify Premium without billing through Apple. This somewhat brash move by Apple could be clear foreshadowing of the company’s intentions. Artists under exclusive deals with the future Tidal/Apple may also be pressured to pull a “Taylor Swift” and wipe their libraries off Spotify – but disguise it as a pro-indie artist PR stunt, of course.
If a deal is done between Apple and Tidal, it’s likely Apple will be looking to bleed out Spotify’s subscriber base through exclusive releases. It’s hard to say how Spotify would respond to the deal but it seems clear that an arena dominated by exclusive streaming rights would leave them vulnerable for the time being. Your Spotify playlists won’t be disappearing any time soon but growing holes in the service’s library could appear in the months following a deal.
When music distribution began shifting to digital platforms a decade ago, Apple had a firm grasp on the market through iTunes. Now that downloading music has taken a backseat to streaming, Apple seems poised to regain its hold on the market through exclusive streaming rights which may soon be strengthened by Tidal and Jay Z’s savvy business-fueled social connections. Tidal’s early message touted a change in the way art is distributed and the success or failure of Apple’s acquisition of the service may speak to the integrity of that hopeful directive.
By Robert Kelly