Jay-Z's New Music Site Won't Kill Pandora, Spotify
Jay-Z is banking on a Tidal wave to kick off a new music revolution. The rapper and producer has relaunched a digital streaming service called Tidal that's part of his $56.2 million purchase of Swedish streaming specialist Aspiro, best known as the parent of European music hub WiMP.
Before Jay-Z's arrival, Tidal amassed a mere 17,000 paying subscribers. However, Jay-Z has lined up an army of famous recording artists to help make it stand out in a very crowded marketplace. Rihanna, Kanye West, Madonna, Coldplay and Jay-Z's squeeze Beyoncé were part of the relaunch, providing some serious star-power ammo to a business dominated by tech giants and well-entrenched leaders.
Tidal may have celebrities, buzz and even exclusive content, but it's not going to be easy to topple Pandora (P) and Spotify.
The relaunched service costs $9.99 a month, in line with Spotify's premium offering and twice as much as Pandora One. Tidal also offers higher-quality music clips for $19.99 a month, making it the priciest platform on the market.
Jay-Z realizes that you can't charge more than existing services without offering more, and in that pursuit Tidal has lined up content that music buffs can't find anywhere else. It's offering exclusive music and videos. Exclusive content by Beyoncé and Rihanna popped up on Tidal over the weekend, and now Bloomberg reports that Jay-Z's breakthrough album -- "Reasonable Doubt" -- is no longer available on Spotify.
This should come as terrible news for consumers. The leading music platforms today offer tens of millions of tracks, but if services convince celebrities to make their best tunes available through just a single platform, it could force users to pay more to get all that they want, resort to piracy or give up on premium music sites altogether.
They Sit at the Bar and Put Bread in My Jar
A big problem with music fans is that they tend to be pretty cheap. Spotify is considered the most successful premium service, with 15 million paying subscribers worldwide, but that's just a quarter of its user base. The vast majority of Spotify users put up with ads and usage restrictions to enjoy the service for free. The divide between payers and freeloaders is even more pronounced at Pandora, where less than 5 percent of its 81.5 million active listeners pay less than $5 a month to strip ads out of the streams.
Folks just don't like to pay for music when it's streamed. They don't have a problem paying up for a concert, but it's a different story online, where it's too tempting to download pirated tracks or settle for legal ad-based streaming sites.
It's not just that most of the Pandora and Spotify users aren't paying. Others that have preceded Tidal in only offering premium services have struggled. Google (GOOG)(GOOGL) hasn't made waves with Google Play Music at $9.99 a month (it's also owned Songza since July, and what's happened since then?), and even Apple (AAPL) hasn't been able to turn Beats Music -- also $9.99 a month -- into a Pandora or Spotify killer.
If the two biggest names in tech and mobile platforms have failed to make a dent in Spotify and Pandora, why would Jay-Z fare any better? Offering exclusives may seem like a good idea on paper, but it will only infuriate music fans in the long run. Instead of getting folks to pay up, Tidal may wind up convincing folks to stop patronizing all premium streaming sites, since they will all be incomplete.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple, Google (A and C shares), and Pandora Media. Try any of our Foolish newsletter services free for 30 days. Check out our free report on the Apple Watch to learn where the real money is to be made for early investors.