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Jay Z relaunches Tidal with music's biggest artists as his co-owners

Jay Z relaunches Tidal with music's biggest artists as his co-owners

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Can they find a business model that works for everyone?

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At a press conference in New York City this afternoon, Jay Z and a huge group of musical stars took the stage to officially relaunch TIDAL, the streaming music service he recently acquired as part of a $56 million deal. The rallying cry was a service that would "turn the tide" and restore the value to music by launching a service owned by artists. Coldplay, Rihanna, Daft Punk, Alicia Keys, Calvin Harris, Jack White, Madonna, Usher, Arcade Fire, Deadmau5, and Beyoncé joined Jay Z in the owners circle. He is reportedly offering millions of dollars and an equity stake to artists who join him.

Turn the tide against what exactly? The unspoken enemies are services like Spotify that offer streaming music for free, supported by advertising. Many artists have accused it of paying only a pittance for the rights to stream their music. TIDAL, by contrast, has promised to pay double the standard streaming royalties, a promise it confirmed with The Verge this afternoon. It's framing itself as a sort of United Artists for the streaming era, a business built in opposition to tech companies that traffic in ads. That sounds like a huge difference, but of course there are some caveats.

Before today, that premium tier was the only one TIDAL offered. This morning it introduced a $9.99 service with standard definition audio, which will pay just the standard royalty rates. The double royalties only get paid on streams for customers who sign up for the $19.99 plan, which promises higher quality audio files, but is twice the cost of a typical Spotify subscription. In other words TIDAL is bound by the same economics as its competitors, but it choose to move up the food chain, away from the free ad-supported tier that pay the least per stream.

The larger argument is over what will be a better business in the long run. Spotify has always argued that offering a free tier helps to build the biggest audience, and that over time more of those people will switch to the paid version. It has gotten to more than 60 million customers this way, 15 million of whom pay. Tidal, by contrast, has only around 17,000 paying subscribers.

It's easy to understand artists' frustration and skepticism. The US music industry generates roughly half the annual revenue it did back in 1999. And while there are tens of millions of people listening to Spotify, the revenue from ad supported streaming is smaller than that generated by sales of vinyl records.

The simple truth remains, however, that streaming music is the industry's best bet for growth. Artists seem to grasp that, but want to make sure that it's paid streaming, where the economics are better for them. That business now generates more money than CDs.

The battle over how best to build the music business — and best for whom — is going to get very heated over the next year. Taylor Swift's departure from Spotify was a big moment, and TIDAL's move to capture exclusives and better reward artists is another. And behind most of these artists are record labels who often negotiate the deals with streaming services and write the checks for the artists only after taking their cut. Where those power players fit into this new "artist owned" service isn't clear, but they often have control over where an artist's music can appear. In an interview with Billboard, Jay Z acknowledged that many label executives were suspicious of what he was attempting to do with TIDAL.

The elephant in the room is Apple, which has plans to relaunch both its Beats streaming service and to integrate it with the iTunes music store. Apple reportedly also plans to eliminate the option of a free tier. If there is any company on earth that can afford to pay a premium to woo artists and win exclusives, it would be the world's richest and most profitable corporation.

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