#TIDALforALL or #tidalfornone?

In spite of its admirable business model, TIDAL struggles to differentiate in the right ways to deliver value to artists and fans.

In March 2015, Jay-Z launched his new music streaming service TIDAL following his purchase of parent company Aspiro in January 2015. It was a highly anticipated launch in the U.S., with Jay-Z promising to create a more sustainable model for the music industry by bringing fans and artists closer together.1

In terms of its business model, TIDAL claims to create & capture value…

  • For Artists: By eliminating the barriers between artists and fans and by paying higher royalties
  • For Fans: By delivering an extensive library of high-quality content on-demand.

Unlike Spotify, its major competitor in on-demand streaming at the time, TIDAL’s revenue model does not include a free, ad-supported version for users – instead offering two paid tiers:

  1. Premium subscription at $9.99 / month: This is very similar to Spotify’s premium option that gives users unlimited access to TIDAL’s content across devices, playlist creation options, and offline listening capabilities. 1
  2. HiFi for $19.99 / month: This is TIDAL’s premium option plus high fidelity (higher quality) music delivery in lossless, CD quality in uncompressed sound files (1411 kbps vs. 320 kbps for standard streaming). 1

While TIDAL’s business model is admirable, it is struggling to actually operationalize its value creation and capture by transforming its assets into valuable actions. Following are a few examples of TIDAL’s ineffective attempts to align its operating model with its business model:

Marketing / Launch

In the leadup to TIDAL’s launch, the service was heavily marketed as an alternative to other streaming services in that was the first artist-owned streaming service in the world,2 claiming that it would “restore the value to music by launching a service owned by artists.”3 Employing the hashtag #TIDALforALL, it gave the impression that it was for artists, by artists, and that it would advocate on behalf independent artists struggling to make a living as a result of low compensation from other streaming services.

However, the official launch was a dramatic press conference revealing the artist-owners of the service, which included only heavy hitters like Jay-Z, Beyonce, Alicia Keys, Arcade Fire, Calvin Harris, Coldplay, Daft Punk, Deadmau5, Jack White, Jason Aldean, J. Cole, Kanye West, Madonna, Nicki Minaj, Rihanna, Damian Marley, Indochine, Lil Wayne, and Usher. After a series of unclear messages about TIDAL’s value proposition, these owners signed a vague declaration to “change the status quo.”4 Hardly struggling artists, this press conference proved inconsistent with TIDAL’s prior marketing messaging, creating skepticism from both the artist community and fans before it even had a chance to succeed. (Click image below to see video of press conference)

NEW YORK, NY - MARCH 30: Usher, Rihanna, Nicki Minaj, Madonna, Dead Mouse, Kanye West, Jay Z, Jason Aldean, Jack White, Daft Punk, Beyonce and Win Butler attend the Tidal launch event #TIDALforALL at Skylight at Moynihan Station on March 30, 2015 in New York City. (Photo by Kevin Mazur/Getty Images For Roc Nation)
NEW YORK, NY – MARCH 30: Usher, Rihanna, Nicki Minaj, Madonna, Dead Mouse, Kanye West, Jay Z, Jason Aldean, Jack White, Daft Punk, Beyonce and Win Butler attend the Tidal launch event #TIDALforALL at Skylight at Moynihan Station on March 30, 2015 in New York City. (Photo by Kevin Mazur/Getty Images For Roc Nation)

Target User / Revenue Model

In an effort to “restore the value to music”3, TIDAL opted not to offer a free, ad-supported option for users, instead offering two paid tiers. Therefore, the entire revenue model hinges on the number of subscribers that use the service, with 0% coming from ads. This strategy presents a significant concern that the higher price point and the HiFi option provides a more high-quality, luxury listening experience, catering to a smaller part of the market and contradicting the #TIDALforALL goal. In fact, several internet users launched the hashtag #tidalfornone in response to the expensive HiFi pricing tier.

Differentiating Offers

With such a competitive streaming landscape, TIDAL needs to differentiate itself to convince users that it is worth paying for. On the surface, TIDAL looks exactly like Spotify’s premium offering, which it is difficult to convince users to switch away from if they have already entrenched themselves in the platform by building playlists and connecting with other users by sharing music. TIDAL’s attempts to differentiate itself have thus far proven ineffective:

  1. Exclusive content & videos: One of TIDAL’s biggest differentiators is its exclusive content (music and videos) from musicians, athletes, entertainers, and independent artists.1 However, this has not proven enough to lure users away from Spotify (as of September 2015, Jay-Z claims that TIDAL has 1 million subscribers while Spotify has over 75 million active users and over 20 million subscribers).5,6 In addition, while exclusive content may be value-creating for individual streaming services, the practice is value-destroying for consumers as a whole if they cannot find all the content they want on one service. Instead, it forces consumers to sign up for TIDAL to stream Prince7 and Apple Music to listen to Taylor Swift8, even if they manage the rest of their streaming libraries elsewhere. As Alice Enders, a London-based music industry analyst commented, “When you make music, your goal is to get it everywhere, not to make it exclusive.”9
  2. HiFi – It is unrealistic to expect the general public to spend $20 / month on high fidelity music when they likely cannot tell the difference in sound quality and when they are largely accustomed to consuming music for less than or equal to half of that price.

Finances & Royalties

Lastly, TIDAL claims to pay artists higher royalties than competitive streaming services, however its royalty payment structure is very similar to Spotify’s, differing by only 5% in payments to rights owners (labels, publishers, artists):

TIDAL royalties

Source: TIDAL website

Spotify-Royalty-Formula

Source: Spotify website

This means that artist compensation hinges on TIDAL getting enough paid subscribers to generate enough revenue to do so, as well as an artist’s relative popularity on the service. However, there is no real value-add aside from exclusive content that will encourage enough users to subscribe to TIDAL. Fairly paying artists is not in itself a good incentive for consumers to pay for TIDAL instead of using other services.

Unfortunately, TIDAL has thus far failed to effectively align its operating model with its business model in order to create and capture value from artists and users. If it wants to be successful in the future, it needs to better define its target user, refine its differentiating offers to actually compel more people to pay for subscriptions, and revamp its royalty structure to actually benefit artists who need it.

Footnotes / Sources:

  1. TIDAL Website: http://tidal.com/soc/
  2. GPB News “Jay Z’s Music Service, Tidal, Arrives With A Splash, And Questions Follow:” http://www.gpb.org/news/2015/04/01/jay-zs-music-service-tidal-arrives-splash-and-questions-follow
  3. The Verge “Jay Z relaunches Tidal with music’s biggest artists as his co-owners:” http://www.theverge.com/2015/3/30/8314833/tidal-jay-z-streaming-music
  4. Forbes “The Tidal Launch: Here’s The Declaration That All The Stars Signed:” http://www.forbes.com/sites/hughmcintyre/2015/04/02/here-is-the-declaration-that-all-those-stars-signed-at-jay-zs-tidal-launch/
  5. Fortune “Jay Z’s Tidal Names Yet Another New CEO:” http://fortune.com/2015/12/02/jay-z-tidal-ceo-soundcloud/
  6. Spotify Press Information: https://press.spotify.com/us/information/
  7. Pitchfork “Prince Removes Discography From All Streaming Services Except Tidal:” http://pitchfork.com/news/60210-prince-removes-discography-from-all-streaming-services-except-tidal/
  8. Tech Times “Taylor Swift Attacks Spotify Again While Praising Apple:” http://www.techtimes.com/articles/75173/20150813/taylor-swift-attacks-spotify-again-while-praising-apple.htm
  9. Bloomberg “That’s Business, Man: Why Jay Z’s Tidal Is a Complete Disaster:” http://www.bloomberg.com/news/features/2015-05-28/why-jay-z-s-tidal-streaming-music-service-has-been-a-disaster

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4 thoughts on “#TIDALforALL or #tidalfornone?

  1. Very interesting choice. I agree, it seems the support from music superstars was not enough to beat the advantage that Spotify gained as a pioneer.
    Apple encountered similar issues in launching their streaming service, in spite of having the advantage of integrated operating eco-system with iOS, iPhone, Mac (which was a key determinant for the iTune’s store success).
    In an era where most of people became used to download or stream music for free, to support artists is not enough particularly when the service offers to the customer very little differentiation in quality and user experience vs. Spotify.

  2. The issue of value capture by musicians has been pretty interesting to follow since the launch of Napster and the rise of file sharing. Unfortunately, there is somewhat of a catch-22 that musicians face when trying to build support and spur action for their cause: the musicians that are materially affected by file sharing and, more recently, free music streaming are typically lesser-known and thus do not command a large enough fan base to result in much meaningful change. On the other hand, big-name artists, like the ones behind TIDAL, are so wealthy, it’s hard for their message to ring true with their millions of fans. Thus, the artists that are big enough to make a difference don’t lend enough credibility to the problem. Hearing Jay-Z claim we need to return more value to artists, and then watching him and Beyonce fly off in a private plane (conjecture, no source) doesn’t motivate me to pay $10 a month.

    The short answer to this problem would then be “let’s get every single artist on TIDAL so we can leverage large fan bases and credible claims for more value.” But, as you point out through Enders, music should be everywhere. At the end of the day, it seems Jay-Z et al have ultimately mirrored Metallica’s response to Napster from ~15 years ago – refuse to adapt to changes in user (fan) behavior. Free streaming is here to stay. Music artists needs to find a way to leverage changing technology to capture more value, not fight it. Instead of milking more value out of their fans, maybe they could take some of it back from the record labels? Who needs those guys?

  3. As you note, I don’t think Tidal is currently creating enough value for its customers to really differentiate themselves from the competitors – mainly Spotify and Apple Music. I also worry that in order to be successful they would have to destroy a lot of value. The only way I see massive amount of users switching over is if Jay-Z and the other artist-owners pull their music from the other services. Is there anything that Tidal could do to better differentiate themselves without going to this extreme in your mind? Better playlists? Early access to concerts/music?

    I’d also be interested to hear what non-owner artists think of Tidal. Here’s one article I found (from Tidal’s perspective though) on their benefits to Indie artists: http://www.digitalmusicnews.com/2015/04/23/tidal-is-going-to-let-indie-artists-upload-their-music-directly/

  4. Two particular questions come to mind when I think about Tidal’s message being “Tidal for All.” First, from a customer perspective, as you point out, the pricing model doesn’t make the service accessible to all (due to the fact that its a fee model). Additionally, I wonder what the company’s awareness ratings are outside of the music industry and apart from those who follow that specific world closely. As a sample size of one, I had never heard of Tidal and I don’t think I’m completely living under a rock (but who knows!)… Second, I’m curious what Tidal is actively doing to promote indie artists since the company claims to “advocate on behalf independent artists struggling to make a living as a result of low compensation from other streaming services.” For instance, is there a “Pandora”-like functionality to the site, which makes suggestions based on artists and songs the customer typically selects when on the site?

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