1) Tidal was acquired for $56 million and is now worth $250 million thanks to its relaunch with major artists like Jay-Z owning equity, however it has an inherently flawed business model in an increasingly competitive market. 2) Tidal exists to address artists' dissatisfaction with low royalty fees from other streaming services like Spotify, by giving artists ownership and a paid subscription model. 3) Tidal's flaws include high fixed pricing of $9.99-$19.99 monthly which is unappealing to consumers who can use free alternatives, and exclusive content alone is unlikely to attract enough subscribers to be sustainable as competition in streaming increases.

1. 1
Tidal – A Sea Change in Music Streaming?
Aspiro was acquired in January this year for $56m and is now worth $250m thanks to the relaunch of
its subsidiary streaming service Tidal. 15 of the world’s biggest artists each own 3% equity in Tidal
with Jay Z, another investor and record labels owning the rest. However, despite its star-studded
New York conference, Tidal exists with an inherently flawed business model in a market that will
only become more competitive.
Why does Tidal exist?
To understand the reasoning behind Tidal, it is important to understand why content streaming
exists. As a very brief background, the widespread availability of the internet in the 2000s allowed
for the heavy piracy of mp3 files whereby downloaders uploaded and downloaded content without
payment. With the development of faster internet speeds, this led to huge losses by the record
labels and, out of what seemed to be their ashes, arrived the legal streaming services. The key
streaming platforms include Spotify, US-based Pandora, Deezer, YouTube and the upcoming Beats
and YouTube Music Key.
Although these streaming services do generate revenue, their profit margins are low and artists have
complained that the little royalty fees that they receive dilute the value of their music. As an
example, Taylor Swift notably removed her discography from Spotify in protest in 2014. It is within
this context of artists’ dissatisfaction that Tidal exists. Under the guise of providing lossless quality
music and exclusive content, Tidal addresses artists’ concerns by placing control back in their hands
with a paid-subscription model.
What are Tidal’s flaws?
Tidal’s business model is inherently flawed because of its strategies regarding high pricing and
exclusive content. The highly competitive streaming industry is also not conducive to Tidal’s success.
The service’s concessions to the artists come at the expense of consumer satisfaction. Unlike
YouTube and Spotify which offer free ad-based content, Tidal’s membership options are fixed at
$9.99 and $19.99 for standard and lossless quality music respectively. The high costs are
unappealing to the average consumer who can use alternative free services and the lossless quality
option will only be appreciated by audiophiles with specific equipment. These high price points also
go against the very reason why streaming is so popular – streaming was born from piracy which is
itself a product of people being innovatively frugal. As a result of how much it costs, not only will
consumers not be attracted to Tidal but fears that this will lead to an increase in piracy may
eventually come to fruition.
Without free memberships, Tidal promises exclusive content in an attempt to allure consumers
away from other services, but it is doubtful how much this will compensate for the service’s pricing
strategy. What sort of content will be exclusive – a song, two songs, a whole album? As much as
these artists may love creating and sharing music, they are in a business driven by sales. If an artist
produces an album exclusive to Tidal that can incur costs in the millions, this limits the amount of
investment that can be recovered to just the income from Tidal’s membership fees. This is
absolutely unsustainable and it is far more profitable to release an album to the masses. It is
therefore more likely that exclusive content will be in the form of a standalone songs and it is very
doubtful that a significant number of consumers will care enough about this exclusive content to
subscribe to Tidal.

2. 2
Rather than its competitors needing to be worried, Tidal should be extremely concerned about what
is happening in the market: i) Spotify will soon be raising $400m from investors including Goldman
Sachs and the Abu Dhabi Sovereign Wealth Fund, thus valuing the company at $8.4bn (33 times
more than Aspiro); (ii) YouTube, one of the world’s largest social media platforms, is preparing to
launch its own paid subscription membership; and (iii) Apple, with over 500m credit card details and
also currently negotiating with artists for exclusive content, is also expecting to relaunch the Beats
platform this June. Competition is drastically increasing and, though there is money to be made, the
increasing competition will decrease the potential for profit which may eventually price Tidal out of
the market – yes it may be the more glamorous option, but it lacks the financial infrastructure of a
Spotify, YouTube or Apple that is required to withstand consumer pressure.
Had Tidal entered into the market earlier, the streaming landscape would be dramatically different.
However, it is currently in an industry that is nearing saturation with consumers’ memberships being
fiercely fought for.
Conclusion
Unless it drastically changes its model to include a free membership option, Tidal will not become a
key provider of content. If it does vary its pricing strategy then it defeats the very purpose for which
it was created (to provide artists’ with more control and a higher return on their music) which may
ultimately result in artists’ removals of content. The increasingly fierce competition will also add
pressure on Tidal and its future looks bleak. Granted it is still very early on its life, but its inherently
flawed model will not institute the sea change in music streaming that its star-studded entrance
suggested.
Jing Wei Luo