Opinion:  Square and Tidal…

…a transaction to improve artists’ fate?
The announcement on March 4 of the acquisition of a majority stake by payment company Square in the Tidal streaming platform for $297 million in cash and shares was met with a generally positive response in the music community.

Square, Jack Dorsey‘s (CEO and co-founder of Twitter)’s company, came to Jay-Z‘s rescue, as he had been trying to make Tidal, which he bought with a few artist friends for 56 million dollars from its Norwegian creators five months after its launch, grow since March 2015.
Jay-Z, who, with Tidal, is losing tens of millions year after year, and Dorsey are friends. The transaction is a fantasy in that the recurring questioning of the artists’ starvation payments by streaming is coming back to the surface in recent times.

User centric?
The arrival of Square, a company offering mobile payment services (payment card reading) and increasingly extending its banking offer to small and medium-sized businesses is therefore not insignificant. There is an integration of the payment chain and, in a way, a connection of the payment chain with the artists who offer the product.

The context itself is conducive to questioning the status quo. Thus, two days before the Square-Tidal transaction, German streaming company SoundCloud announced the implementation, as of April, of a new remuneration system for artists based on listening time. This system was particularly demanded by classical artists, as a symphony movement could be ten times longer than a song. Will this first be a breach in the system?

For there is a long way to go in terms of fairness in this market. Streaming, which now accounts for 83% of music market revenues in the US, is dominated by Spotify, which boasts 155 million paid subscribers worldwide, ahead of Apple Music (72 million) and Amazon Music (55 million). YouTube Premium boasts 30 million paying subscribers.

In this universe, the sums paid for subscriptions are distributed according to the Market Centric logic, i.e. in proportion to the total number of listenings. This system, decried by artists, favours the big stars to the detriment of the small players who plead for a User Centric model, dependent on the individual listening of the subscribers.
As Agence France Presse reported on 2 March, a study by Deloitte on Spotify and Deezer, completed in January 2021, concluded that with a shift from market-centric to user-centric: royalties would increase by 24% for classical music, 22% for hard rock and 18% for blues. On the other hand, mainstream music such as rap would see their royalties fall by 21%.

A marginal player
Beyond the fantasies of a better world, a few basic observations are in order. As soon as Jay-Z, who heads a group of artists, took control, Tidal was presented as a fairer platform that paid artists more.

But if everyone finds – or pretends to find – this scandalous, no one does anything about it. Although it is regrettable, the remuneration of artists is the least of the worries of the mass of consumers, who go to YouTube or Spotify, which has 190 million free users in addition to 155 million paying ones.

The other argument for Tidal was HiFi and the audio added value. This niche market (Quobuz HD‘s global figures published by Forbes are 200,000 subscribers), which has allowed Tidal to make its mark, is going to be competed with head-on by Spotify Hi-Fi, a new service announced on 22 February 2021 for launch later in the year.

It remains unclear how marginal Tidal is in this market. Tidal has never revealed the number of its paying subscribers, which can only be guessed at knowing that subscription revenues were $165.82 million annually in 2019 for operating losses of $52.2 million.

So where is the logic, where is the development? The need for a streaming tool in what I would call the Dorsey ecosystem should probably not be underestimated. Bezos (Amazon) has his, Google have theirs (YouTube), Apple have theirs, how could Twitter lack one?

The tree that hides the forest
But on a less psychological and more mercantile level, the idea will necessarily be to bet on a mutation towards a User Centric/Artist Centric pairing. CNN reported on 5 March the words of a Wedbush analyst, Moshe Katri: Square‘s current strategy is to build ecosystems around merchants/sellers and consumers.

With this in mind, we need to look beyond streaming and Jack Dorsey let the cat out of the bag when he said: “We’ll be working on entirely new listening experiences to bring fans together, simple integration for merchandizing, modern collaboration tools and new complementary revenue streams.

What if the new Tidal were to become unique by becoming a fan club-type interface, in which artists could monetize the marketing of all types of more or less exclusive items linked to their cult of personality that would enter directly into their bank account, with the platform taking a percentage on the transaction?

The platform’s functionalities which may be modified by this acquisition. According to Gartner analyst Avivah Litan, interviewed by Reuters, the keywords that would make the transaction make sense could well be Blockchain and NFT. NFT or NonFungible Tokens are a digital signature that certifies the authenticity of a digital item.

Practical example: on 6 March 2021 none other than Jack Dorsey auctioned his first tweet. At last count, it was over $2.5 million.

After Bitcoin, NFTs are emerging as the new El Dorado. Their trade is still in its infancy; $63 million in 2019 and $250 million 2020 according to the Paribas workshop reported on 8 March by Le Journal du Net in France.

But the Journal du Net gives an example of NFT use that says it all: British band Disclosure, for example, did a live stream on the Twitch platform during which they composed a song that was put into an NFT. There is therefore only one copy of this song. Photos, videos are concerned. That’s the trick. And any artist will eventually be able to price anything in cryptocurrency: a personalised Instagram message, an occasional Happy Birthday
You wanted to know where Tidal is heading? There you go!