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:
- 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
- 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)
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.
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:
- 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
- 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):
Source: TIDAL website
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:
- TIDAL Website: http://tidal.com/soc/
- 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
- 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
- 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/
- Fortune “Jay Z’s Tidal Names Yet Another New CEO:” http://fortune.com/2015/12/02/jay-z-tidal-ceo-soundcloud/
- Spotify Press Information: https://press.spotify.com/us/information/
- Pitchfork “Prince Removes Discography From All Streaming Services Except Tidal:” http://pitchfork.com/news/60210-prince-removes-discography-from-all-streaming-services-except-tidal/
- 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
- 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