“It comes down to one simple idea: finding new ways for artists to support their work,” Jack Dorsey, Square co-founder and CEO, said in a statement. “New ideas are found at intersections, and we believe there’s a compelling one between music and the economy. I knew Tidal was something special as soon as I experienced it, and it will continue to be the best home for music, musicians, and culture.”
The sale is a coup for Jay-Z, who relaunched the streaming service six years ago after buying Tidal’s Swedish parent company Aspiro for $56 million in 2015. Since its rocky launch at which a handful of the world’s richest artists stood on stage and said they were underpaid for their music -- garnering an immediate public backlash -- the company has faced a range of challenges, from being sued over claims of false advertising around exclusive releases to a $3 million dispute between the service and artist shareholder Kanye West, who terminated his exclusivity deal with Tidal in 2017.
Tidal quickly stopped reporting subscriber numbers publicly, with the service reportedly hovering around 3 million paying subscribers in 2018, compared to Spotify’s 20 million subscribers at the time.
Despite the issues, Tidal was given a lifeline by Sprint (now merged with T-Mobile), when the telecom giant invested $200 million into the streaming service for a 33% stake, valuing the company at $600 million. The influx of cash did not stop Tidal from falling behind on paying its bills, with the streaming service failing to pay rights holders on time in 2018. According to The New York Times, Jay-Z bought out T-Mobile's stake and most of those shares will be sold to Square in the acquisition.
"I said from the beginning that Tidal was about more than just streaming music, and six years later, it has remained a platform that supports artists at every point in their careers," Jay-Z said in a statement. "Artists deserve better tools to assist them in their creative journey. Jack and I have had many discussions about Tidal’s endless possibilities that have made me even more inspired about its future. This shared vision makes me even more excited to join the Square board. This partnership will be a game-changer for many."
In an interview with Billboard, Dorogusker says Tidal’s focus will be on building out new tools to support artists throughout their careers, alongside Tidal’s core music streaming business, which he says is growing.
"We think the streaming service is an important part of it, and it is growing and will continue to grow," Dorogusker says. "But we're especially interested in creating new adjacent opportunities in service of the whole artist experience and their experience with their fans in addition to the streaming service. That could be more about creating new markets like Square did in the early days; we were serving customers that were largely underserved and created a market, and we see millions of entrepreneurs, artists, musicians in the world who are underserved."
Potential synergies for Tidal are available with Cash App, Square’s mobile payment service, which could allow fans to pay artists directly for content or merchandise.
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Square’s acquisition of Tidal is expected to alleviate concerns around the music industry, as Tidal had once again been behind on payments to multiple rights holders in 2020, according to multiple sources. Square and Tidal will jointly focus on improving the streaming service’s payment structure moving forward. Tidal is also the subject of a data fraud investigation in Norway, on claims that it inflated the number of streams for albums including Beyoncé’s Lemonade and Kanye West’s The Life of Pablo.
According to Dorogusker, Square is happy with the state of Tidal and did its homework on the company. “We feel really good about the diligence we did,” Dorogusker says. “We asked a lot of questions. We get to the bottom of what we need to certainly not going to comment on any investigations that are ongoing, but we feel good about it. Both sides feel really good about signing this deal.”
Despite the controversy, Tidal has grown in recent years, with revenue jumping 13% in 2019 to $166.9 million, but losses have also increased, jumping from $36 million in 2018 to $55.9 million in 2019, according to financial documents filed by Tidal’s parent company Project Panther Bidco in the U.K. Tidal pointed toward its expanded relationship with Sprint as a source of the improved revenue numbers.
Tidal was also early on prioritizing podcasting and investing in high-fidelity audio, both of which have grown in popularity in recent years, most recently with Amazon and Spotify both rolling out Hi-Fi tiers. “The model Amazon is using now for their higher-priced tier, Jay-Z showed there is an audience there, you have to give him credit for that,” one major label executive told Billboard.
When asked about the future of Tidal’s podcast strategy, Dorogusker said the company will focus on music. “To the extent that artists are doing podcasts in service of their business, great, but we're not looking at audio generally,” Dorogusker says. “We're not trying to win the ear, what we're trying to do is be committed to music and musicians, and make sure that Tidal continues to be a great place for music, music culture, and artists.”