Tidal: What Could Have Been

The music industry has seen quite a bit of change with regards to how users consume their music; it has become more and more digitalized. Long gone are the days where you see people running along with Walkmans in hand. People have since converted to using MP3’s to listen to their music. However, this area has evolved as well. In the recent past, almost everyone used iTunes to purchase songs, but now, streaming services dominate. The trend of music streams going up and digital purchases from platforms such as iTunes going downward has been occurring for quite some time. With the essential death of iTunes, 2 significant players in the streaming market have emerged: Spotify and Apple Music.

Spotify is the most popular of all platforms, boasting a user base of 100 million users. Spotify’s main attraction is the fact that they offer both a free subscription with ads, and a paid ad-free subscription ($10/Month). 70 million of Spotify’s users are practitioners of the free service. Apple Music, on the other hand, only offers a premium service ($10/Month or $15/Month for a family plan) Being relatively new to the game, Apple music has a user base of 15 million, but that number is growing quickly and is only 1/2 of the Spotify’s paid consumer base. Furthermore, Apple Music has access to the entire iTunes library, and due to its popular name/the ridiculous cash on hand they have, they can afford to pay for limited exclusive rights to new releases and albums that artists put out. They signed Drake, one of the biggest names in the industry today, for about $20 million in order to get limited rights to his music. Many others, such as Arianna Grande, Frank Ocean, and Taylor Swift, give Apple first dibs when it comes to their content (in Swift’s case, Apple is the only company that has access to her music).

There is a 3rd player in this market as well. In 2015, Jay Z acquired Tidal in an attempt to provide a unique streaming platform to users, and he was financially backed by various artists. His value proposition was built off of three main things. In the past, Spotify has come under scrutiny for providing low royalties per stream for musicians. On average, Spotify pays out between $0.006 and $0.0084 per stream, so less than a cent. Because of this, many artists, most notably Taylor Swift, decided to take their entire catalog off of Spotify. Jay Z and Tidal’s backers claimed that Tidal would pay a 75% royalty rate to all artists, far more than any other streaming platform. This, theoretically, would help out many independent artists who have been getting stiffed with Spotify’s rates.

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Secondly, Tidal users would have access to a plethora of exclusive content. Many of the people who have a stake in Tidal are among the biggest names in the industry. Jay Z, Rihanna, Kanye West, and Beyonce all have released exclusive/limited exclusive content on Tidal. Kanye’s The Life of Pablo, Beyonce’s Lemonade, and Rihanna’s ANTI were by far three of the biggest releases this year in music, and all were only available on Tidal at some point (In Beyonce’s case, Lemonade will only be available to stream on Tidal for perpetuity).

Tidal Launch Event NYC #TIDALforALL

NEW YORK, NY – MARCH 30: (L-R) Usher, Rihanna, Nicki Minaj, Madonna, Deadmau5, Kanye West, JAY Z, and J. Cole onstage at the Tidal launch event #TIDALforALL at Skylight at Moynihan Station on March 30, 2015 in New York City. (Photo by Jamie McCarthy/Getty Images for Roc Nation)

Lastly, Tidal gave users the option to purchase a plan that gave them access to lossless audio. Basically, when compressing music into an MP3 format, all the sounds a machine thinks the human ear can’t audibly perceive are discarded. This makes the file much smaller. However, many people can notices the bits of music that have been left out, so it seems as though they are listening to lower quality music. Lossless audio, or HiFi as Tidal calls it, employs a compression technique that retains every single bit of detail from the original recording, while still managing to reduce file sizes considerably.

With all three of these factors combined, one would assume that Tidal would be pretty successful. However, Tidal has only amassed 3 million users since Jay Z and company took over, and has been involved in a ton of negative press. Why is this the case?

Improper Pricing

Tidal’s owners’s vastly over estimated what users would be willing to pay for their service. Originally when Tidal was release, users had to buy the HiFi option, which costs $20/Month. After 7 months of poor performance, they began offering another version that was priced similarly to Spotify, and had the same music quality as well. Realistically, the average listener most likely can’t tell the difference between lossless and regular audio, so why would anyone pay twice as much than they would with another streaming service? Why would they pay of they could listen to it for free on Youtube or Spotify? Lossless audio is a very technical concept that the masses really don’t care for

Improper Evaluation of Content

Tidal also put too much stock into its exclusive content. Tidal boasts an extremely impressive lineup of artists who provide the platform with music, videos, and much more. When Lemonade was only available on Tidal, it shot to the top of the App Store. However, Beyonce, in all her wisdom, would never limit her profits by alienating customers who don’t have Tidal, so she made the album available to purchase on iTunes as well. For Beyonce fans, it makes much more sense to simply make a one time purchase to own the album, rather than pay a monthly fee for it. And for those who don’t want to pay anything at all, they could pirate it. For example, The Life of Pablo was pirated over 500,000 times in less than a week after its release.

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Misjudged What Users Care About

Additionally, the owners assumed that since they are paying the highest royalties of all the streaming options, customers would be inclined to adopt Tidal. They tried to play the morality card, which in theory isn’t a bad strategy. Many potential customers, especially millennials, will spend more on brands that are socially responsible. However, simply not enough people actually care about the royalty aspect of streaming. If I’m listening to Beyonce, Jay Z, Madonna, or Rihanna (who all have a stake in Tidal), do I really care how much these millionaires are making off royalties?

Barriers to Entry

Lastly, Tidal faced high barriers to entry. At the time of its release, Spotify already had amassed a user base of over 75 million people. When Apple released Apple Music, it had access to the millions of Apple product users. These network effects, combined with aforementioned factors, proved to be too much for Tidal to overcome.

7 comments

  1. Yes, I remember when Tidal was launched, I asked myself “what can they possibly be thinking?” As it violated some fundamental business concepts that you describe above. The motivation to give the rich artists more money was not a great motivator, especially since artists have already figured out how to make money off of live shows.

  2. vicmoriartybc · ·

    As a huge Beyoncé and music industry fan, I really enjoyed reading this! I think you nailed the reasons for why Tidal hasn’t been a huge success. I think another reason is that not even the artists themselves seemed fully on board with Tidal. Beyoncé is the only original backer of Tidal whom has not allowed any other streaming service to pick up her album. While Rihanna and Kanye West seemed fully in support of Tidal at first, they both released their major albums for the year on Spotify as well. As a consumer, this signals to me that these major artists do not even believe that Tidal is the best streaming service, so why should I pay a premium for it over Spotify? I’d love to know how those boardroom conversations went between those artists and Jay Z when they let him know they wouldn’t be exclusively releasing on Tidal.

  3. jagpalsingh03 · ·

    I remember when Tidal launched, and as a big fan of pretty much every single person on the stage at their launch, I was excited; however, that soon turned to confusion as their launch came off as both ambiguous and pretentious. Now whenever I go online now, there seems to be so much disdain for Tidal because of this “rich artists get richer” mentality. Poor launch aside, I feel that since Tidal has such heavy weight exclusives (Kanye West, Jay Z, Beyonce, etc), it can remain afloat long enough to be bought out by the winner of Apple Music vs Spotify (or even Samsung if they enter the market). And I’m 110% sure that being bought out was Jay Z’s plan all along. He’s smart enough to know that his brand recognition is enough to make a dent in the market but that his financial backing can’t compete with Apple or Spotify. So look for Jay Z and other investors get even richer.

  4. I found this very interesting because I’ve never seen the appeal of Tidal. I haven’t listened to Lemonade because I didn’t feel like getting a membership. Something I think is important to note is that when Kanye released his Life of Pablo album on Tidal he was constantly tweaking and updating the songs even after they were released because he said the songs were always a work in progress. I think this is an interesting concept that not many people would embrace or could pull off but it is definitely original and exclusive.

  5. mashamydear · ·

    I think another important reason for Tidal’s lack of success is the high switching costs in streaming services. Spotify users have a ton of playlists and starred songs/albums saved on that platform and are following what their friends are listening to as well. Switching to Tidal would mean the loss of those curations and networks, and is that opportunity cost really worth it when the prices of both streaming services are essentially the same? I know a lot of people (including myself) were frustrated with the exclusive release of Anti and Lemonade on Tidal, but it still wasn’t enough for them to cancel their Spotify subscriptions. I actually signed up for a free trial on Tidal to listen to Lemonade when it first came out, but I made sure to cancel the subscription when the free trial expired. Unless there’s some sort of cross-platform agreement between big streaming players, I think it’ll be difficult for Tidal to increase its market share.

  6. polmankevin · ·

    Great post. I remember trying to listen to Life of Pablo when it first dropped. It was obviously restricted to Tidal, but after a month or two Kanye eventually released it to Spotify and Apple Music. I think one of the core issues with the streaming industry is trying to juggle sales and exclusive content. Apple music has done a good job of exclusively managing key albums, but after a month or so they release them to Spotify anyway. People who have a Spotify account and really want to listen to the album more than likely just pirate the music. At some point artists aren’t going to exclusively release their music on Tidal if it doesn’t make financial sense for them to do so. Their investment in Tidal or relationship with Jay-Z may not be worth the money that they could be making by streaming their new albums over multiple services. I think this tipping point is rapidly approaching.

  7. For a little bit, the future of Tidal looked bright. Apple was in talks of buying it on multiple occasions but it just never came to fruition. The thing about Apple Music that a lot of people don’t realize is that it’s the only one of these major streaming services that allows their users to download music from 3rd parties and listen to all of the free music available on the internet using their streaming service like people did with iTunes for so many years as opposed to being restricted to what’s available in their selection. People could also use this feature to pirate the files for all of the exclusive content on Tidal and listen to it on Apple Music with no problem (not that I’ve ever done this). Spotify is currently in talks of buying Soundcloud and if this happens then Tidal is going to be the only streaming service that won’t give their users access to free music, one more handicap to add to the list.

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