Why the Music Industry Is Still Rooting For Tidal, Despite Chronic Payment Issues
Tidal, Jay-Z’s streaming service, has become notorious for late payments to labels, according to a half-dozen industry executives, and recently denied allegations by a Norwegian newspaper that it falsified plays for Beyoncé and Kanye West albums, a year after reports that it had inflated its subscriber count.
But the music industry has largely stayed mum about these issues and is still rooting for Tidal’s success. One reason: despite its struggles, the scrappy service has managed to sign up approximately 30,000 subscribers to its $19.99-a-month high-fidelity service tier since its March 2015 launch, a source tells Billboard, a model that could help the music business continue to grow once streaming services have snapped up all the fans that are willing to pay for monthly music subscriptions.
Tidal was among the main topics of discussion at the Music Biz conference in Nashville last month, due to a story by Norway’s Dagens Næringsliv that alleged the digital service manufactured hundreds of millions of phony plays for Tidal co-owners Beyoncé and West. Tidal denounced that report, but the newspaper then followed up with a story alleging that Tidal hadn’t made payments recently to the major labels.
But according to many of the independent and major label executives that attended convention, Tidal’s late payments are nothing new, and not of much concern: it has lagged since early 2016, when it was behind for months on end until the end of that year, before catching up by early 2017. Payments began sliding again a few months later. “Tidal is usually behind in payments; I forget if they are four months behind or six months,” a major label executive told Billboard.
Another major label executive agreed that it “goes in fits and starts” and “payment consistency gets in better shape and then it falls off, but it’s not that I think they can’t pay their bills. I don’t get the feel that they are drying up on revenue.”
Tidal declined to comment.
Meanwhile, many executives were baffled by the allegations of fake plays -- which Tidal denied and labeled a "smear campaign" -- while some at the Nashville convention wondered if Tidal’s team was organized enough to pull such a thing off. One executive told Billboard that the Norwegian story "[alleges that] Tidal falsifies plays, but it's just as easy to believe that it may have happened inadvertently, if it did happen.”
Labels and distributors are pulling for Tidal to get its act together because, unlike other digital services, it doesn’t offer an ad-supported tier, nor bargain-basement-priced initial subscription offers, nor family plans. Tidal is aggressively trying to upgrade its subscribers beyond the almost-universal $9.99 price point by promoting its high-fidelity tier for $19.99 -- and appears to be succeeding.
Though Tidal doesn’t disclose subscriber numbers, one source estimated the company’s global subscriber count at about 1 million, while another source says that in the U.S., Tidal has 380,000 to 480,000 subscribers, of which 30,000 are paying the premium price for the higher quality sound. Tidal is available in 52 countries around the globe, according to the company's web site.
Music publishers, meanwhile, say Tidal does make payments on time. But those payments and the reports that are required to accompany payments are made by the outside firm -- Music Reports Inc., or MRI -- that Tidal has hired to handle publishing royalty payments, sources say.
Most digital services use outside agents like MRI, Harry Fox and Medianet, among others, to make payments on their behalf to publishers because connecting master recordings with compositions written by multiple writers is a complex, time-consuming task. But figuring out which label suppliers to pay for music plays is considered a much easier process to report on -- and pay for, sources say.
In contrast, payments to labels are made by Tidal itself, which is why indie and major labels and distribution executives say it’s a more chaotic situation. And “every time we get payments, we still have to work our way through five or seven issues to clear up what exactly their payments and reports are representing,” according to the major label executive. “It’s not like they give us a beautiful executive report where everything lines up like most of the other services give us. We have to piece together information from them to figure out what they are reporting and paying.”
An indie executive says his label spends as much time sorting out the Tidal reports as it does for all the other problems in reports from other digital services.
A source familiar with the Tidal payment situation says that issue may have taken a backseat at the company while its management placed its emphasis on expanding to new territories and growing its subscriber and revenue base. Unlike Apple, Amazon and Spotify, Tidal is a small company, with about 130 employees -- only two of whom are handling label payments, this source notes.
Consequently, that source acknowledges that in the past, Tidal may not have paid as much attention to fiscal responsibilities as the labels would like; Tidal management has been much more communicative this year in its dealings with labels. Moreover, it's working hard to improve its systems and infrastructure in order to eliminate problems like this, the source adds.
At the end of the day, another indie label executive wonders when the industry is going to stop cutting Tidal slack and hold it accountable to the industry standards that other digital service providers are held to.
But another source counters that even though Tidal is still a smaller digital service, “it has to operate under a gigantic magnifying glass, which makes things more challenging for the company.”
Instead of late payments, that source suggests that the industry should focus on Tidal’s efforts to generate a higher-value music user, as well as its projections to grow faster than the overall music industry thanks to deals it has done partnering around the globe with Sprint; Vodafone; Mercedes-Benz; Deutsche Telekom; Telefonica and WatchMusic.