Saturday, April 4, 2015

Jay Z's Tidal Service Fights for Streaming Music Supremacy

Written by Steve Knopper -- Tidal's key assets are the world's biggest pop stars, including Jay Z, Beyonce, Madonna, Rihanna and Kanye West, and a set of principles that suggest artists should always receive proper compensation. But does the newly relaunched music-streaming service have anything else to compete with Spotify or Apple's upcoming Beats Music?

"If the $10 service is identical to others, then there's no particular advantage to people going to it," says attorney Larry Kenswil, a former top Universal Music digital executive. "You've got to still favor Spotify, because it has such a huge market share."

Until mid-March, Tidal was one of the smaller companies in the booming streaming-music market, which grew in revenue from $1.4 billion in 2013 to $1.9 billion last year, according to the Recording Industry Association of America. Then Jay Z's company Project Panther Bidco bought Tidal's Swedish owner, Aspiro AB, for $54 million, and relaunched the service earlier this week as a splashy, star-studded operation, declaring "a whole new era."

"We're not going to give away music for free," Vania Schlogel, Tidal's senior executive, tells Rolling Stone, referring to YouTube and the ad-supported portion of Spotify's service. "There's not going to be a massive free tier that dilutes the value of music."

She adds: "We're not here to wage war, or try and steal subscribers from other streaming services. What we're here to do is change the conversation about the value of music."

As streaming takes over from CD sales (which dropped 13 percent last year, according to the RIAA's latest report) and iTunes-style downloads (which dropped from $2.8 billion to $2.6 billion), many artists have criticized services such as Spotify and YouTube for low royalty payments. Upon releasing her smash album 1989 last fall, Taylor Swift declared: "I'm not willing to contribute my life's work to an experiment."

Since then, top executives at major record labels have declared they would push Spotify and others to limit or "window" the available music on free streaming services. Tidal's owners have picked up this rallying cry. "This is a platform that's owned by artists. We are treating these people that really care about the music with the utmost respect," Jay Z told the New York Times before relaunching Tidal.

But many in the music business wonder if Tidal has a sufficient business model to go after Spotify's 60 million users, 15 million of whom pay $10 a month, or YouTube's 1 billion viewers. Apple, which bought Beats Music in 2014 as part of a $3 billion deal for the Beats Electronics headphones company, also plans on launching its own on-demand service soon. Tidal charges a $20 monthly fee for high-quality audio files, though executives are promising exclusive content from top artists.

"I'm very skeptical of the idea that you're going to get any significant members of the public paying $240 a year [for streaming music]," says Bobby Rosenbloum, an entertainment attorney for Greenburg Traurig in Atlanta, which represents several top digital-music services. Adds Kenswil: "Charging an extra $10 a month on the chances your favorite artist will put some unique content up, as opposed to going to their website — it's a challenge."

Also, most of the stars who receive a reported 3 percent apiece of Tidal equity will be unlikely to provide hot new exclusive content. So far, the service has posted mostly retreads, such as the White Stripes' first-ever TV appearance and Daft Punk's 9-year-old Electroma film.

Almost all of Tidal's new celebrity owners are signed to major record labels, who have an interest in spreading their content to as many services as possible. "On one hand, artists are coming out and saying, 'Hey, subscriptions are good.' On the other hand, they're picking a horse and saying, 'If you pick this service, you can't get [the exclusive content] on the other ones,'" says Anthony Bay, chief executive of music-streaming service Rdio. "That, to me, is perplexing, and I don't think it's going to work." Top label executives have said recently they'd like to limit free streaming, so fans who pay get access to more and newer content than those on the ad-supported model.

Tidal's Schlogel, however, believes the artists' presence alone will overcome any of these potential problems. She won't divulge specific details about how Tidal will properly compensate its non-owner artists, other than to say Tidal, like Beats or Rhapsody, charges fees to all users.

"I would be surprised if the labels fight this, because the labels are for the artists, and I would imagine they really want to support an artist-owned platform," she says. "We just took control of this company a few weeks ago. Not everything's built in there right now. But all these programs we're working on, like fostering emerging artists and cementing connections between artists and fans—that is all to come."

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