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Behind the Scenes of Tidal’s Stormy Launch — and What’s in Store for the Future

Even with 16 superstar artists signed on as equity partners of Tidal, Jay Z's new streaming service played defense post-launch.

Moments before Jay Z and 15 other superstar artists took the stage in a studio behind New York’s James A. Farley Post Office in Herald Square to unveil plans for Tidal, a relaunch of the Swedish streaming music service, no one seemed more confused than the artists themselves.

Densely packed into a single green room, the group was given instructions to line up in alphabetical order, “like in grade school,” remarked an observer, with Deadmau5 swapped out of line at the last minute to appear next to Madonna and avoid a helmet clash with fellow dance act Daft Punk. Nearby, Beyoncé asked, “I’m not going to be with my husband?”

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Minutes later, more than 350,000 people tuned in to a live stream to hear the news about “a moment that will forever change the course of music history,” as Alicia Keys read from an artist-penned manifesto. But by the time it all wrapped 10 minutes later, with the likes of Usher and Nicki Minaj rushing out to catch flights, many questions remained. For starters, if 16 of music’s biggest artists (Rihanna, Jack White and Kanye West, among others) are equity partners in a streaming service, how will other musicians benefit? And what will change in those artists’ existing record contracts when it comes to releasing new material exclusively through the service? And where were acts like Taylor Swift, Radiohead and Drake, three of the most outspoken artists on digital music’s shrinking value?

Early critics of Tidal have already cracked that it’s “music’s 1 percent” and an Illuminati-like exclusive club of already-rich artists seeking to benefit themselves. Vania Schlogel, chief investment officer at Roc Nation and Tidal’s main industry liaison, maintains, “If anything, it’s the opposite of that … We have been developing a program to foster the careers of independent and emerging artists — that’s very important to the founding artists.” Schlogel later noted in a Q&A with New York University that the program will include stock appreciation rights, which would give independent artists an opportunity to obtain equity.

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Tidal is, in part, a response to the industry’s frustration of low royalty payouts from a free on-demand service like Spotify, which pays artists an average of $4,700 for every 1 million streams of a master recording, according to Billboard estimates. Schlogel declined to provide specifics on Tidal’s rates, only to say that artists will be “paid multiples higher than other free services on a per-stream basis.”

Standing out in an increasingly crowded pack of on-demand audio players (Deezer, Rdio, Xbox Music, Rhapsody), as well as video services like YouTube’s forthcoming Music Key and the just-launched Vessel, also will be a core challenge for Tidal. Negotiations are already underway for exclusive streaming windows from the participating artists and beyond, including Daft Punk (the duo’s hard-to-find short film Electroma was available only on Tidal at launch) and Rihanna (her new single “Bitch Better Have My Money” is currently only streaming on Tidal). Beyond that, however, little will be different. “Nothing changes about their [existing] contracts,” says Schlogel. “We’re working alongside the labels, we’re not looking to try and pick fights.” Adds Warner Music Group COO Rob Wiesenthal, “It has been proven that fans will pay for early access to great experiences.”

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But a battle has already begun behind the scenes ahead of Jimmy Iovine‘s planned relaunch of Apple’s Beats Music, expected to debut in June as a paid-only service. Sources confirm that artists including Drake and Pharrell Williams are in talks to be involved with the Beats relaunch in some capacity, which may explain why a few obvious names were missing from the Tidal press conference.

Without naming specifics, Jay Z acknowledged a bidding war with Iovine in a March 27 interview with Billboard. “I don’t have to lose in order for you guys to win, let’s just remember that,” said the 45-year-old rapper. Still, one senior music executive proffers that Tidal missed its real target: free. “Those artists should have been up there saying, ‘Mr. Daniel Ek! Mr. Larry Page! Take that music down!” says the insider, referring to Spotify CEO Ek and Google CEO Page. “Like Ronald Reagan, ‘Bring the wall down!’ That’s what you should use those 16 musicians for.”

This article first appeared in the April 11 issue of Billboard.