Sprint takes 33% stake in Jay Z’s Tidal

The streaming music industry was struck with an unexpected wave of excitement when Sprint – a U.S wireless carrier owned by Softbank – revealed that it would acquire 33 percent shares in Tidal. The latter is a Norway-based music startup that was acquired and then re-launched in 2005 by Jay Z as a platform for competing against such giants as Apple Music and Spotify by providing high definition audio services from popular artists. Sprint announced that it plans to avail the service to its 45 million mobile users, including pre-paid and subscription tiers. The companies added that the content from Tidal and its artists will only be available to Sprint customers.

Jay Z acquired Tidal from Swedish based Aspiro at a staggering $56 million, subsequently unveiling a lineup of seventeen other famous musicians as co-owners in the venture: Usher, Rihanna, Nicki Minaj, Madonna, Deadmaus, Kanye West, Jason Aldean, J. Cole, Jack White, Thomas Bangalter and Guy-Manuel de Homem- Christo from Daft Punk, Beyonce, Chris Martin from Coldplay, Régine Chassagne and Win Butler from Arcade fire, Calvin Harris, and Alicia Keys. Tidal entered the market against some particularly strong forces. The most notable ones were Spotify, who boasted 60 million users overall (with 15 million premium subscribers), and Beats (owned by the mighty Apple) and many more. At that time, the company had less than 40,000 premium subscribers.

Actual Value?

While the value of the stake has not being divulged, Music Business Worldwide reported it at a whooping $200 million, valuing the company at $600 million. A sprint spokesperson refused to comment on the values, citing that they do not provide financial figures. Tidal has reportedly been in discussions with Rhapsody and Apple on acquisition matters as well, and is live in more than 52 countries. It boasts a song catalog of at least 42.5 million and high quality videos totaling 140,000. The main difference between Tidal and other streaming services such as Spotify is that it does not provide a free service tier. Instead, it has a basic service subscription of $9.99 a month and a premium tier of $19.99 that delivers high definition audio quality.

Unmatched records

During its first acquisition year, the company recorded a $28 million loss – three times more than that of its 2014 figure. The 2016 figures have not been released yet, but there have been questions over the precise number of people using the service. Although Tidal maintained it had three million subscribers in March last year, it has been involved in court cases against its former owners for inflating figures while simultaneously being sued for the same accusations. For instance, during its claim over three million subscribers, it was revealed that only 850,000 people had subscribed to the company’s streaming service (without about 1.2 million active accounts).

Judging by their books, everything seems foggy and messy from an outsider’s perspective, leaving one to wonder whether Softbank knows something we don’t. Nonetheless, this investment will give Tidal the much needed cash injection and possibly a much larger number of subscribers. On the other hand, the deal gives Sprint the chance to differentiate itself from the pack. According to Claure, Tidal combines a business and cultural environment to create a world class music streaming platform, which is unparalleled in terms of content and quality. Since most of its owners are artists as well, their passion and dedication will go a long way towards helping Sprint offer fans new and exciting access to exclusive entertainment experiences like no other service can provide.

Good News

From a deeper perspective, mergers between music streaming companies and mobile carriers are a great way to grow user base and attract more subscribers. Another notable partnership was the 2014 tie-up between Sprint and Spotify, which saw the introduction of free Spotify Premium service for six months and then at a discount for higher tier subscriptions into Sprint’s mobile service. The new partnership between Tidal and Sprint will see the latter’s CEO – Marcelo Claure – join Tidal’s BOD. Jay Z announced that Sprint shares the company’s vision of revolutionizing the creative industry so that artists can connect with their fans directly and achieve their fullest potential. He added that the chief executive officer understood Tidal’s goal immediately and was excited to bring an unequaled entertainment experience to Sprint’s 45-million customer base.

In the short period since its acquisition in 2015, Tidal has debuted new albums from super stars such as Beyoncé and Kanye West, as well as new music videos, concerts, playlists, songs, and remixes from those and many other artists. However, since Tidal does not have a free tier, only paying subscribers have access to these exclusives. It is important to note that Tidal will remain under the direction of the numerous music stars that helped bring the company to the limelight since 2015, despite Sprint’s CEO joining Tidal’s board of directors.

Hard Times

Interestingly, a Norwegian newspaper called Dagens Naeringsliv had suggested that the company was exaggerating its number of subscribers. Rumors had been going around that several companies were interested in investing in Tidal, although none of these were actually confirmed. Some of the notable firms include Apple and Samsung, but these were quick to deny any talks of acquisition. Generally, the company has been going through a rough patch especially after its executive was sued by the Prince’s estate over rights to the deceased back catalog. According to the lawsuit, Tidal did not have authorization to stream certain albums from the late singer’s music collection.

Brighter Future

In addition, The Wall Street Journal had indicated that Tidal was losing a lot of money and needed an outlet to pay its bills. As such, the news that a cellular company had bought 33 percent stake in Tidal came as a true surprise. However, the deal might just turn out to be a silver lining for both parties. Music streaming seems to be the new trend for mobile carriers. In 2013, Telefonica – a Spanish mobile carrier – bought a stake in Rhapsody before it was rebranded internationally as Napster. So the next time Rihanna, Kanye West, Beyonce, and dozens of other artists release a new album, you may have to update your mobile carrier for a good listen.