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Why Apple buying Tidal makes sense

Why Apple buying Tidal makes sense


... and why it doesn't

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Apple is apparently in exploratory talks to acquire Jay Z's streaming service Tidal, for an undisclosed amount, according to The Wall Street Journal. Recode later confirmed the talks, though the sale might not happen, according to Ben Sisario, the excellent music reporter at The New York Times. Either way, the potential of this seems insane for a number of reasons, first among which are suggestions that Apple was actively engaging in a smear campaign against Tidal last year, and secondly Tidal owner Jay Z's general disdain for the company. But it also makes sense for both parties, given the uphill battle they both have surpassing Spotify to become the top streaming service (Apple's road is way, way, way easier, but still), and the synergies that exist between the two companies.

Let's go over why this is could work.

1. All exclusive streaming deals come under one roof

Exclusive album releases aren't going anywhere, and the two players in that game are Apple Music and Tidal. Spotify has said it won't engage in the exclusive game, which means there is potential for Apple Music to become the sole place for new music from big artists on their release day.

Now, there's no guarantee that artists that have an ownership stake in Tidal would have the same incentive to release their content exclusively on Apple Music without the same benefits (I wouldn't bet on Lil Wayne getting his ownership shares from Tidal transferred over to Apple), but a nice check from Apple can make everyone friends again.

Apple could become the official home for new music

If Apple does manage to keep all the Tidal artists, it's feasible that Apple could catch up with Spotify's 30 million paid users in the next year or so (the acquisition of Tidal alone would push it to nearly 20 million paid subscribers), but that 100 million number looms large, and Apple will have to make some changes to reach that target.

The easiest way is to become the official home for new music. If the sale goes through, there is a very real possibility of future releases from Drake, Beyoncé, Taylor Swift, Kanye West, Rihanna, Jay Z, Madonna, Future, Chance The Rapper, Nicki Minaj, Jason Aldean, Pharrell, and Daft Punk to land on Apple Music before anywhere else. And let's not forget Prince's music catalog, which lives solely on Tidal, but could find a much broader audience with Apple Music.

For fans who must have new music first, signing up for Apple Music could become a very easy decision.

2. Jay Z wanted to get artists paid more. Tidal artist-owners would get paid handsomely

Apple Music has proven itself to be artist-friendly in many ways

Here's the thing that makes this deal workable for Jay Z. When he purchased Tidal, he made his thoughts clear; tech companies were making all of this money off the back of artists, while the musicians saw their pay decrease as the world switched to streaming music. Over the past year Apple Music has proven itself to be artist-friendly in many ways, doing deals with Drake, Taylor Swift, and Chance The Rapper to fund everything from concerts to music videos to tours. And for the 20 Tidal artist-owners that own 2-percent shares in the company, an Apple acquisition of Tidal for a large sum means everyone gets paid.

Sure, it wouldn't be the same as getting Apple and Spotify to raise the pay per stream rates, but if Jay Z can deliver a sizable check to every artist that came on board — I'm guessing this would be an all-cash deal rather than a stock deal if Apple goes through and acquires Tidal — he can lay claim to victory by getting the world's biggest music store to cut a check to those in the music industry who agreed and believed in his idea.

3. Apple Music becomes the artist-friendly service, and positions Spotify as the enemy

After the dust settles, Apple could walk away with Trent Reznor, Dr. Dre, and Jay Z as executives, cementing themselves as the corporate friend of the artists, and paint Spotify — which offers a free tier that most artists hate — as the enemy of the industry.

The fight against Spotify's free tier — which got a nice push from Apple last year — died when it became clear to the music labels that Spotify's 25 percent conversion rate from free users to paid was too good to get rid of. So what's the best alternative if you can't beat them? Join the biggest company on earth with a massive music marketing budget, no free tiers, and attempt to make it the artist haven that Jay Z dreams about at night.

With Jay Z as an executive, Apple could cement itself as the corporate friend of artists

Despite the initial doubts about Apple Music from the music industry, it has proven over the last year that it's willing to financially invest in artists more than anyone else. Combine that investment with a stable of superstar artists who all are happy because they just got paid, and the fact that Spotify still offers a free tier and largely refuses to do exclusive deals (which puts money directly in the pocket of artists), and Apple Music moves from the perpetrator to the benevolent benefactor with artists in leadership positions.

Why this deal may not happen

There are tons of reasons why this deal could die before talks get too serious. Reports say Apple delayed approval of updates to Tidal's app when the service relaunched last year and it's not promoting releases by Tidal artists, which hasn't gone over well in the least; the relationship between Jay Z and Apple executive Jimmy Iovine goes way back, but the two may not be on the greatest terms as of late; Tidal may not like the money Apple is offering; there could be reservations from other Tidal artist-owners about working with Apple Music; Kanye does or says something; and the list goes on.

But for Tidal and Apple, the reasons to do this deal largely outweigh the negatives. Both Apple Music and Tidal are united by an ethos to create an artist-first platform that pays well and allows musicians an environment to experiment, thus making a culture clash unlikely. And no matter how much they pay, if Apple can get Tidal's artists to agree to work with them it's a great move for Apple Music's consumer marketing, and its perception within the music industry.

A lot could go wrong before this deal is even close to being solidified

And for Jay Z and Tidal, walking away with a nice profit, a potential executive position at the most powerful music company in the world (let's be clear, it isn't any of the labels), and the ability to spread that cash around to the artists who backed him is definitely a best-case scenario for the tumultuous company and the rapper turned businessman from Brooklyn.

There's a lot of detail to work out still, and a lot could go wrong before any of this is close to being solidified. But Apple acquiring Tidal isn't as crazy as it might initially sound and could be a win for both parties.