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Why Tidal Have Got It All Wrong

Jay Z's new streaming services is doomed to fail, here's why

2Apr

There was a fair amount of coverage this week about the launch of Tidal, a new music streaming service from some of the biggest names in the music world.

Fronted by Jay Z, the service will offer essentially the same product as Spotify and other music streaming platforms.

The three main differences between Tidal and others are:

1) It is designed to give more money to the artists

2) It has lossless song quality

3) You need to pay more for top quality streaming

The big question is, will these kind of changes persuade people to switch from their existing services to Tidal? I would argue that they will not.

Despite what the company claims, the biggest selling point of the product is that it is ‘artist owned’. However, the artists who own it are the people who do not need more money.

The people lined up on stage were all A-List celebrities, the combined net worth of everybody on stage at the launch was estimated to be $2.8 billion. If the idea of the service is to provide music for artists who are not being paid well by streaming sites, then this is entirely the wrong people to endorse it.

A prime example of how much can be made is Taylor Swift (not part of Tidal), who took her back catalogue off Spotify. It has been estimated that she would have made $6 million per year at the rate she was being streamed. If the idea behind this was to get Spotify to pay more to artists, there would perhaps be better ways to do it. The way that streaming payment works is through paying the artist a certain amount of money every time their songs are played. In Spotify’s case, this works out at around $0.007 per song.

This may not seem like a huge amount of money, but when you consider that Spotify has around 60 million users, these numbers can quickly add up. Tidal currently has around 500,000 users, meaning that even if they paid each artist 20 times more, they would still earn less money per artist. For instance, Spotify paid over $1 billion to artists in 2014 alone. To do this from a base of 500,000 they would need to extract $2000 of value from every single customer and pay no operating costs.

Also the idea of lossless streaming seems good on the surface, but the reality is very different.

There is a reason that most people on Spotify (45 million of 60 million) use their free platform. It is simply that they want to listen to music, but without spending money. This free account means that they get low streaming rates, which makes the quality of music only 160kbps.

When you compare this to the 1440kbps that Tidal will offer, you can see the difference, but the numbers of users speak for themselves. If 75% of Spotify’s users prefer to listen for free to lower quality music and listen to adverts, then they will certainly not have any interest in paying any money for music, let alone $20 for music that is of a higher quality.

If you are listening to music in a studio with high end headphones then this may be a selling point, by 99% of those using the service will be listening through cheap headphones from their phones. Will they really care about having higher quality music?

At the press conference launching the product the problem was that it had the wrong feel. It did not discuss any of the capabilities or things that people really cared about. I don’t care that Madonna is going to stand next to a man with a mask on, I care how this product will work for me.

The press conference took away what should have been an explanation of a rival to Spotify and instead seemed to be trying to make a case for why consumers should make these very rich artists even richer. Jay Z and Beyonce alone are worth $1 billion, if this platform is meant to be for suffering artists, why do they have some of the world’s richest people fronting it?

Image: Adam J. Sablich / Shutterstock.com

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