Is Jay-Z going to learn just how hard it is to run a successful streaming service with Tidal?
Jay-Z's press conference to announce the re-launch of Tidal definitely caught the attention of the industry and fans alike with its power stacked roster of superstars in attendance. We wish Tidal the most success and think it is brilliant to see a streaming service that provides an offering designed by the artists themselves, but Jay-Z will need to show that he has what it takes to run a successful music tech company.
There are some common struggles that Tidal may face. Streaming services are all struggling to make money with high royalty costs that they must pay to rights holders while having enough left over to invest in their product and employees.
One of the key messages that Tidal is pushing is that it's a streaming service owned by the artists. Tidal is a service that offers high quality music and is being pushed as "Music as the artists intended." The question is, is it what the average music consumer wants in a streaming service? It's great that the streaming service is built for artists, but it's important to remember that streaming services should actually be built for the end user, the fan. Even though artists may put a lot of importance on high quality streaming to enjoy songs with the best audio, what percentage of music fans will actaully be willing to pay a premium for higher quality streaming?
Tidal currently has just 17,000 paying subscribers. Will they be able to offer a product that can compete with power streaming services such as Spotify or Pandora with millions of users?
Another point that isn't mentioned much is how artist owned, Tidal, will help independent and unsigned artists. Some of the biggest stars who each own 3% of the $200M valued Tidal are also signed to major labels. One of the toughest challenges in music is the difficulty of a lot of non-superstar artists to make any money at all.
A lot of debate occurs between artists, rightsholders, and the streaming services around proper royalty rates and intellectual property payouts. It might be a good lesson for the artists of an artist owned streaming service to see just how difficult it is to manage and run a successful and profitable streaming service. Why will Tidal be any easier to run than other streaming services?
When Billboard asked how Tidal would pay artists more than current streaming services, Jay-Z replied:
Will artists make more money? Even if it means less profit for our bottom line, absolutely. That’s easy for us. We can do that. Less profit for our bottom line, more money for the artist; fantastic. Let’s do that today.
However, in 2014, Tidal posted a net loss of €9M.
Ultimately, Tidal has the potential to be very beneficial to the music industry as an artist owned streaming service that delivers music streaming based on what the artists, the creators, want. It just might be a more difficult endeavor for the artists than it seems.