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Air Conditioning and Clarification

Will TIDAL Change the Tide or Drown?

This past Monday, Jay-Z, along with a host of celebrity partners, launched TIDAL a high-quality streaming music platform. The service features a $20/month subscription fee (along with a $10 option for standard quality) and is owned by the artists themselves. Hov purchased the platform earlier this year in bidding a whopping $56M for Swedish tech company Aspiro. Hyped as the next wave (pun intended) in streaming music, the biggest question is whether or not consumers are eager enough for high-quality audio to pay the high monthly subscription price. While the public seems to have been won over by the Beats Audio movement with their emphasis on better sound quality, the jury is still out on whether that was really a victory of quality or branding. Artists have long decried the royalty payments from existing streaming platforms, specifically Spotify, from which Taylor Swift famously removed her music back in November. With musicians in control of their product and with extra features like video, will TIDAL be able to take big enough strides to change the streaming music game?

With a “soft launch” last October, TIDAL went live this week featuring a #TIDALforALL Twitter campaign and a star-studded commercial. Ironically enough, TIDAL’s UI (user interface) is almost directly ripped off from Spotify as shown in the image below (TIDAL in the top half, Spotify the bottom).  Also, producer Haxan Cloak (@haxan_cloak) has taken to social media to complain that TIDAL used his “song” without permission for the ad.

tidal-vs-spotify-ui @ www.JPLimeProductions.com

Over the past year and a half Spotify has become the fastest-growing platform in the streaming music market, making small improvements to both their free and premium subscriptions and boasting 60 million active users (15M paid subscribers). Despite its smooth, user-friendly experience – I personally use it every day – the complaints from artists have persisted since its inception. With record labels conducting the royalty negotiations, the pay-out rates (currently at $.006 – $.0084 / stream) are painfully low. This complaint isn’t limited to Spotify, of course, it’s launched at the streaming industry as a whole. The argument against Jay-Z and his crew is nearly as ardent, with many fans taking to social media to express their anger over “millionaires just aiming to get richer”. In the wild west of “free” digital music (where “free” often means “stolen”), how inevitable is paid/premium service?

“The challenge is to get everyone to respect music again,” said Jay-Z, “to recognize its value. Water is free. Music is $6 but no one wants to pay for music. You should drink free water from the tap — it’s a beautiful thing. And if you want to hear the most beautiful song, then support the artist.”

Tidal-Jay-ZThis muddled analogy exemplifies where the star seems to be missing the point. Clear, free-flowing water is, in fact, a beautiful thing, but its analogous equivalent is what Jay is trying to eliminate. Ethically it makes sense, but practically and economically, what is the incentive to the consumer? Why would I go buy bottled water if it’s the same quality flowing freely from the tap? It’s the central issue facing folks in the music industry who are trying to change the streaming market: Once a cheap/free resource has been made available, how do you convince the market to then pay more? How do you get the genii back in the bottle? Two options that presently exist are a) decrease the availability of one’s music on free streaming services (lower the supply) and b) provide a better quality experience, including exclusives and extras (raise the demand). A defining move in TIDAL’s potential success would be the artists involved taking the Swift route and working to get their music removed from other services. Collectively they represent some of the most popular music acts in the world so the effect of losing their catalogues on Spotify would be significant. But while they’d like to be paid more, they certainly aren’t willing to lose the sales they are getting, taking away their biggest bargaining chip. So until (and if) TIDAL is popular enough to be financially successful, I predict that none of the artists pull off of Spotify (and others). Furthermore, despite including some of the biggest stars in the world, it’s tough to say whether the artists involved would even have the ability/pull to get their music removed from other streaming services.

Other than audio quality, the other big difference between TIDAL and Spotify, to stay with the same example, is the absence of a free version. Used as an enticement toward paid/premium packages, the so-called “freemium” model employed by Spotify includes ads and a number of other inconveniences on the mobile platform, the biggest being an inability to choose individual songs (Shuffle Play only). I am an excellent example of someone who used the free version for a long time and for whom my use was high enough to make the $10/month premium service worthwhile. Would I pay $20? Probably not, so price point is clearly a key factor. Apple’s Beats Music, set to premiere in June, was rumored to be hitting market at $8/month but after negotiations with the major record companies that doesn’t seem to be feasible and they have settled at $10.

A key to refining the market seems to be user experience, often including exclusives and, in the case of TIDAL, other media such as video. The problem is that none of the “exclusives” so far offered on TIDAL are all that interesting. They include the White Stripes’ first tv appearance back in 2000, Daft Punk’s 2006 film “Electroma”, and playlists created by some of the big artists like Jason Aldean’s favorite party songs. You can’t package crap in an “exclusive” box and expect it to be a driving promotion. The difference in user experience needs to be substantive to make an impact.

The sales pitch for TIDAL is based on two key factors: a consumer hunger for high-quality audio and a desire to change the “criminality” of stolen music. In terms of business and the free market, this seems a bit like pushing a stone up a hill. Neither tenet is a viable business motivator and so much of the momentum is pushing in the opposite direction. You can’t force the free market to make ethical decisions- you have to make it the economically viable choice and so far TIDAL hasn’t offered any plan in this direction. Part of the reason is that it’s not like other streaming platforms are getting rich off the artists. Spotify is only marginally profitable, paying 70% of its revenue in artist royalties.

United Artists @ www.JPLimeProductions.comDoes this add up to a bleak projection for TIDAL? Probably, but one silver lining is that increased competition can only help to innovate and improve the market so while the platform itself might not succeed, the concept and the effort are important. With comparisons being made to United Artists, the film company formed in 1919 by Charlie Chaplin, D. W. Griffith and others, Jay-Z and his TIDAL partners are looking to correct an ethical dilemma through a frail business plan and I, for one, don’t predict success (UA didn’t do well either). Apple’s Beats Music is set for (re)launch in June, with better price points, integration with iTunes and Apple TV, and what I imagine will be a bigger splash than Monday’s underwhelming TIDAL news conference. Rihanna released her new song “Bitch Better Have My Money” for exclusive streaming on the platform. With such a star-studded lineup why didn’t anyone else do the same, such as Kanye who has an album about to come out? Why didn’t Jay?? My guess is that they rushed to get ahead of Beats Music and will pay the consequences. Instead of Hov playing the role of the mythical Sisyphus pushing the stone that is streaming music up a hill in perpetuity, he should attempt to innovate. Maybe then he won’t flush $56M down the drain.

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