Music streaming – Tidal wave

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Tidal at risk of being swamped by a wave of bad press.

• Tidal is a music streaming offering backed by Jay Z and other artists that launched with much fanfare at the end of March but it looks like the offering is already in serious trouble.
• Following a rocky launch where the company seemed to be asking users to pay double simply to keep music stars happy, the company may be on the brink of losing the rights to stream music from Sony.
• I understand that Sony is demanding significant upfront payments from Tidal which Tidal cannot afford because it has hardly any users.
• The bad press does not stop there as the loss of Sony will mean that Jay Z’s wife Beyoncé will no longer be on Tidal.
• This makes Tidal look foolish and underlines the fact that virtually none of the stars that were on stage at the launch control the rights to their own music.
• The biggest problem that Tidal has is that it has virtually no customers.
• Although Jay Z has claimed that the number of users of his service is 900,000, I think the reality is much less palatable.
• Aspiro (the company Jay Z purchased for $56m) has two music services, WiMP and Tidal.
• WiMP is a carrier driven music service which in March 2015 had around 475,000 users while Tidal is the direct to consumer offering and had 15,000 users.
• Users are able to sign up for a month free trial of Tidal and I suspect that the majority of the user base is made up of these “free” users.
• The fact that Tidal has disappeared out of the top 700 top grossing apps in iPhone in the US implies that users try the app for a month and then cancel as soon as they are required to pay $19.99.
• Tidal has three main problems.
  • First. It has no power.
  • Spotify now constitutes a not insignificant percentage of music label revenues and is closing in on 100m users.
  • This means that the music labels and artists are beginning to need Spotify as much as Spotify needs them.
  • In contrast it makes little difference to the labels whether Tidal lives or dies and so they have no real incentive to see it survive.
  • Spotify has laboured for years to get to this point which is why Tidal must build a big base of users if it is to have a chance.
  • Second. It is much too expensive at $19.99 per month.
  • As far as users are concerned, they are being asked to pay double for an inferior service.
  • Spotify has spent a long time developing its service and it is far better than Tidal when it comes to both streaming performance and the user experience.
  • Tidal also has no free tier and so its chances of building a viable subscriber base with its current model are practically zero.
  • Consequently, I think that Tidal will end up biting the bullet and cutting its price to $9.99 and adding a free tier but by then it may be too late.
  • Third. The bad press is a real turn off for users.
  • The trials and tribulations of this fledging service are being feted by both the music and technology press making it even less likely that a user will chose this service over Spotify.
• Although Apple appears to have delayed the launch of its Netflix competitor, it looks like the music service with Beats will be launched next week at WWDC with a price of $9.99.
• Apple has an installed base of 330m devices which gives it a huge initial advantage over Spotify.
• However, it will have to offer a superb user experience if it is to win customers over.
• Creating great Digital Life services is not Apple’s strength and so I am undecided as to whether this service will meaningfully threaten Spotify.
• The end result is that on its current trajectory, Tidal has very little chance of success unless something imminently changes.
• This will leave Spotify and Apple to slug it out for the online music streaming business.