Music Business / Uncategorized

Sprint Invests in Music Streaming Service Tidal

crowdsprintIn an effort to save the failing music streaming service Tidal, primary owner Jay Z made a decision to sell a 33% share of the company to cell phone carrier service Sprint. The deal was reportedly for $200 million dollars according to Dan Rys of Billboard. This purchase was somewhat surprising to those in the industry as Tidal has yet to post a profit after losing $28 million dollars last year. However, this major acquisition does have various positive outcomes that can occur for both companies.

For Tidal, this acquisition primarily makes the streaming service much more competitive in the industry. Tidal reported in March of 2016 that it had 3 million subscribers, although a recent report by a Norwegian newspaper said the company in fact only had 1.2 million subscribers. Either being right, this number of subscribers is completely dwarfed by other giants in the music streaming industry; Spotify has over 40 million paid subscribers alone while Apple Music just surpassed the 20 million subscriber mark at the end of 2016. Compared to only these two industry leaders, Tidal seems to be a lost cause. Despite this, Sprint valued the company at $600 million dollars through its purchase, over 10 times more valuable than when Jay Z and others bought Tidal in 2015 for $56 million dollars. Sprint’s acquisition may not seem like a smart move, but many believe the cell phone company must have something up its sleeve.

Sprint’s next move with Tidal is to make it available to all of its cell phone users. As Sprint stated in its press release about the purchase of Tidal: “Sprint will make Tidal available to its 45 million post and prepaid customers.” This plan of action can be very profitable for both companies. For Tidal, it would finally gain a consistent subscriber base that will help in competing with industry leaders like Spotify and Apple Music. Tidal will, as stated in the press release, “help Sprint acquire new customers [and] reward current customers.” By the wording of this statement, it seems that Tidal may become available to all Sprint users either for free or a reduced cost. Although it is still unsure exactly what Sprint’s plan of action is, the cell provider must see some value in the $200 million dollar purchase.

Tidal’s selling to Sprint also has many implications on the music streaming industry. If Sprint’s plan is to give its 45 million users access to Tidal, it would become one of the leaders in the music industry and essentially equal in users with Spotify. Tidal could actually be a legitimate competitor in the music streaming industry instead of just a small player. This could lead to actions by the current leaders of the industry to make new moves, like by acquiring other streaming services, as Spotify was rumored to be doing with SoundCloud. Extra competition would compel music streaming companies to improve their product and find a way to make their service stand out to customers. Tidal is already one of the few streaming services to offer HIFI streaming, which is described on its website as, “CD quality music meaning that the files are not compressed, so that you hear the music the way the artists intended for their music to be heard.” Tidal has an advantage over rivals Spotify and Apple Music in quality of sound, and if the deal with Sprint results in a large influx of subscribers then it may actually become a serious competitor. Music streamers should be thrilled about this new purchase and the benefits that may arise for the consumer due to the added competition.

Sources:

http://www.forbes.com/sites/zackomalleygreenburg/2017/01/20/has-jay-zs-tidal-been-inflating-subscriber-numbers/#3d02e91d3f1e

http://newsroom.sprint.com/news-releases/sprint-acquires-33-percent-of-tidal-and-creates-game-changing-partnership.htm

http://www.billboard.com/articles/news/7510245/tidal-posts-28-million-net-loss-2015-jay-z

http://www.billboard.com/articles/business/7662653/sprint-jay-z-tidal-33-percent-stake-purchase

https://pittbusinessreview.com/2016/11/14/spotifysoundcloudbuyout/

https://www.cnet.com/news/sprint-now-owns-a-third-of-jay-zs-tidal/

One thought on “Sprint Invests in Music Streaming Service Tidal

  1. Pingback: Jay-Z the Businessman | Pitt Business Review

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