Memo to Tidal, Beats: Pandora, Spotify Are Here to Stay

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It didn't take long for Tidal to realize that it's not easy to take on Pandora (P) and Spotify. Last month's Jay Z-backed relaunch of the Swedish streaming site packed plenty of star power, but it's been fizzling out in a hurry.

Tidal's CEO stepped down in mid-April, and initial reports of layoffs haven't been shot down. We're also now seeing the Tidal app plummet in popularity from app charts, another ominous observation that Tidal's wave has washed out.

This is the kind of development that should scare Apple's (AAPL) Beats Music, which, like Tidal, is lining up celebrities and exclusive tracks in a bold attempt to get folks to pay up for music. It hasn't been working for Tidal. Folks apparently aren't interested in shelling out $9.99 a month for tunes -- and much less $19.99 a month for higher-quality clips -- when Spotify has proven itself as a premium on-demand platform of choice.

And the Beat Goes On

Tidal and Beats Music haven't had a problem drawing musical celebrities to fly their banners. They promise higher royalty rates, armed with subscription revenue that's greater than any advertiser is willing to pay to reach those listeners through ad-based models. The problem is that consumers aren't playing along. The majority of Spotify accounts and the vast majority of Pandora users are freeloaders.

The end result is that artists will get more money and exposure by reaching a potential audience in the tens of millions through either Pandora or Spotify than generating more per stream through the hundreds of thousands on Tidal or Beats Music. The initial star power that Jay Z helped attract to Tidal as an equity partner and the exclusive tracks that he provided apparently haven't been enough to get consumers to embrace digital music as something worth paying for -- at least through Tidal.

Pandora and Spotify have convinced a lot of people to be premium subscribers, and they now combine to have nearly 20 million of their 140 million collective listeners paying for enhanced listening experiences. The ad-supported platform enjoyed by the other 120 million music buffs serves as a gateway to recruit premium subscribers. In a gutsy -- and seemingly boneheaded -- move, Tidal and Beats Music have decided that the only way to consume either platform is to pay. That has made Tidal a hard sell in recent weeks apparently, and Beats Music will likely face a similar fate in June's expected relaunch.

Built to Last

Disruptors get disrupted, but it's a safe bet that Pandora and Spotify will still be around in a few years, entertaining even larger audiences than they do today. Pandora may even make a more ambitious push overseas.

Some of the music industry's biggest stars haven't been able to change that in recent weeks at Tidal, even though it should be noted that this battle is far from over. However, even the country's three largest technology companies -- Microsoft (MSFT), Google (GOOG) (GOOGL) and now Apple with Beats Music -- have faltered in taking market share with premium digital music platforms. There may one day come a model that truly challenges Pandora and Spotify, but there are no signs that that eventual disruptor is out there.

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.
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