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Tidal's secret weapon isn't celebrities: It's Live Nation

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The future of streaming music is about to get very messy

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Tidal, the streaming service purchased by Jay Z and co-owned by some of the world’s biggest musicians is much more than just one more player in the streaming music market. The company has released exclusive songs and music videos from Rihanna and Beyoncé over the last week, and it appears that’s only the beginning. There are two factors that separate Tidal from the fray: the ability for many of the 16 artists who have a stake in the company to pull their music catalogs from competing services at any time, and the possible involvement of Live Nation, a partner of Jay Z’s Roc Nation and one of the most powerful companies in music.

Earlier this week, Jay Z pulled his first album, Reasonable Doubt, off Spotify. He was able to do that because he owns the master recordings to all his music, something that most musicians give in part or full to their labels when they sign a record deal. But when Jay Z became the president of Def Jam Recordings in 2004, he negotiated the return of his masters as a part of his agreement to run the label. That means whenever a streaming service or company wants to use any of Jay Z’s music for anything, they have to clear it with him, taking the music label completely out of the picture.

Now, most artists don’t have the power or the financial ability to get their masters back from their label, but the 16 artists targeted by Jay Z weren’t randomly selected. Arcade Fire, Jack White, Beyoncé, Madonna, Rihanna, Kanye West, and Daft Punk have considerable control over their music, which allows them to decide when and where future releases can and will be placed. If Rihanna — who is signed to Jay Z’s Roc Nation label — wants to release her album exclusively on Tidal, she can.

If Rihanna wants to release her album exclusively on Tidal, she can

Of course exclusive albums can and will be pirated. What would change the game is those artists pulling their catalogs from Spotify, Rdio, and whatever Apple decides to call the next iteration of Beats Music.The 16 Tidal artists represent every major music genre; pop, rock, country, R&B, hip-hop, and EDM. While not having one artist wouldn’t cause most people to switch streaming services — Taylor Swift’s catalog isn’t on Spotify, but is available on Tidal, for example — a group of the top artists in the music business ditching a service is all but a nail in the coffin. How long would you keep paying for Spotify without Jay Z, Beyoncé, Rihanna, and Kanye West? Or Rdio without Jack White, Arcade Fire, and Daft Punk? Or Beats Music without Madonna, Coldplay, and Usher?

Of course the more people streaming your music, the more money you make. So why would artists want to restrict access to their music to one platform? Leverage. If you listen to musicians tell it, streaming payouts are ridiculously low. Tidal artist Jason Aldean pulled his album Old Boots, New Dirt from Spotify after it set the streaming record with 3 million streams when it debuted last year, stating he wanted "everyone who is involved in making my music to be paid fairly." Aloe Blacc, who co-wrote and sang on Avicii’s hit single "Wake Me Up!" wrote in Wired that even though the song was streamed more than 168 million times on Pandora, he was paid less than $4,000.

So where is the discrepancy coming from? Who is getting all the money that supposedly makes streaming a viable option? The music labels. When Spotify or any streaming service pays out royalties for streams, that money heads to whoever owns the masters and publishing rights first — which is the label most of the time — and then the artist.

How long would you keep paying for Spotify without Jay Z, Beyoncé, Kanye West, and Madonna?

The payout rates streaming services offer aren’t low (they could be better, but we would’ve heard more complaints from major labels if they were bad), but that money just doesn't make it to the artist, and that’s what the artists that signed up for Tidal are aiming to change. If Tidal can get enough people to switch from its competitors, it could force Spotify and Rdio to consider shutting down their free tiers — which pay a fraction of the amount per spin that paid subscriptions do — and possibly negotiate on behalf of raising the artist's cut of the streaming payouts to regain the music it could lose.

While increasing payouts for musicians across the board may be the initial goal, it is not the only one. When Jay Z and Tidal's chief investment officer Vania Schlogel spoke to students at the Clive Davis Institute of Recorded Music last week, Jay Z noted that Tidal "isn't just about music; it's also about concert ticketing. It's a holistic place where the artists will live." For Tidal to become a platform that can offer its users not just songs and music videos, but potentially early access to concert tickets it will have to work with one company: Live Nation.

Though its name has been nowhere around the proceedings of Tidal, Live Nation could be involved. Jay Z has deep ties within the company (Live Nation signed Jay Z to a $152 million contract and funded Roc Nation back in 2008), and he’s not the only one. Nearly every artist that owns equity in Tidal has a working relationship with Live Nation (the exception is Daft Punk, who rarely tour). Madonna signed a 10-year, $120 million contract with the company in 2007; Arcade Fire, Beyoncé, Rihanna, and Usher’s last tours were promoted by the company; Nicki Minaj and Jason Aldean’s current tours are as well.

Paying for more than one streaming service could be the only way to access all the music that you want

Live Nation is the largest concert promoter in the world and the way most of the artists working with Tidal make their money. While music sales may be in trouble, touring is still a lucrative endeavor, and it's one that Live Nation — which owns or operates 158 venues in six countries, produces over 60 music festivals per year, and owns Ticketmaster — is deeply involved in. If Tidal has any aspirations to offer tickets through its service, Live Nation would have to be involved. We reached out to Live Nation to ask about its involvement with Tidal, but it declined to comment.

It’s fascinating to think that the two companies who bring the most revenue directly to musicians — Apple and Live Nation — could find themselves on opposite sides of a battle that’s about to take place in the music industry. There is little doubt that Jimmy Iovine is trying to strike the same exclusive deals with artists for its own streaming service, and probably will succeed, given Apple’s impressive cash pile and his deep industry connections.

Looking across this changing landscape, the near future of streaming music could be very messy. Users who want to hear every artist on their preferred platform might face a fragmented market, with some exclusives owned by Apple, some by Spotify, and some by Tidal. Vigorous competition between services is usually great for consumers, but in this case, as the struggle between artists, labels, and tech platforms plays out, paying for more than one streaming service could be the only way to access all the music that you want.

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