Jay Z launched a new music streaming service, Tidal, this week with a somewhat bizarre press conference. The service appears to bring two main things to the table:
- Tidal has direct financial connections to very popular artists.
- It’s selling itself as a purveyor of high-fidelity music. Existing services tend to max out at 320 kilobytes per second (kbps), and Tidal is offering 1,411 kbps streaming, which is essentially CD quality.
It’s super early to start kicking Tidal’s tires, but it has a couple of competitive advantages and disadvantages out of the gate.
I realize there are audiophiles among us, and they will probably love this product, but how much of America really cares a ton about music quality? I couldn’t find data on this, but I’m not sure there’s a lot of people downloading music on iTunes and yearning for higher quality. Audiophiles may enthusiastically sign on, but I don’t know if — discounting the exclusivity — the music quality alone would be enough to sell Tidal to the masses.
What’s more, I think there’s evidence that people are not ready for the product that Tidal is offering. Remember, high-fidelity audio streams at 1,411 kbps. Most people who stream music are used to, at best, 320 kbps. Extra quality requires extra bandwidth. Here’s gadget blog Tools and Toys on what this means:
Streaming an hour of 1,411 kbps music uses about 500 MB, compared to 140 MB that music streamed at 320 kbps uses. Since data usage — at least on mobile — is a real concern, most music streaming services default to a lower bitrate.
So the data required to play an hour of 320 kbps music would be used up in about 17 minutes on 1,411 kbps. This isn’t a death sentence — users can get around the problem by downloading music when they’re on WiFi and not browsing new music too much while on 3G or 4G, but that’s not really how people stream music.
I don’t think the average American’s data plans can take it, according to a quick back-of-the-envelope estimate. In January the investment blog The Motley Fool reported that the average U.S. consumer used 1.8 gigabytes of data in a month. Based on the Tools and Toys numbers, 1.8 gigs per month is only about 3 hours and 36 minutes of 1,411 kbps streaming. That’s way less audio than Americans typically consume. In May 2014, Edison Research found that Americans spent 4 hours and 5 minutes listening to audio per day (that includes terrestrial and satellite radio, owned and streamed music, and podcasts). Edison found 11.6 percent of that time was spent on Internet radio services. So Americans spent an average of 28 minutes per day streaming music.
The average listener would blow through a month’s worth of data in about a week, is what I’m saying.
Recruiting subscribers will be another obstacle for Tidal. Right now, it’s got 540,000 paying customers. Spotify says it has “over 15 million.” Pandora One had 3.5 million last November. Beats has fewer — maybe 300,000 — but it’s owned by Apple, which owns music juggernaut iTunes and is preparing for a major play in the streaming world in its own right.
Consider the ancient (like one week old) parable of the Meerkat. The live video streaming app piggybacked off Twitter for several weeks. Then Twitter launched its own homegrown live video streaming app, Periscope. Meerkat is now screwed. If an entity with a massive paid subscriber base or distribution platform is able to replicate your startup’s core advantage, your startup is not going to have a good time.
And that’s where the advantage of offering high-quality streaming may be jeopardized. If Apple comes out and says they too will have lossless high-fidelity sound, how much does that hurt Tidal? If Spotify creates a new tier at the same price point, will Tidal be able to compete for those hi-fi fans?
There is an argument in Tidal’s favor. We’ve seen with Netflix, Amazon Prime, HBO and other video streaming services that exclusivity is a very good way to gain and keep subscribers. Just like there are people who subscribe to HBO just for “Game of Thrones,” there’s an argument to be made that people could subscribe to Tidal just for, say, new Rihanna releases.
Look at the people who were on stage with Jay Z on Monday: Alicia Keys, Arcade Fire, Beyonce, Calvin Harris, Chris Martin, Daft Punk, Deadmau5, Jack White, Jason Aldean, J. Cole, Kanye West, Madonna, Nicki Minaj, Rihanna and Usher, according to Music Business Worldwide. Do you like any one of those artists? Well, here’s one reason they may agree to some degree of exclusivity with Tidal, according to Billboard:
Each of the 16 participating artists are believed to have been gifted 3% equity in the company, with the remaining stakes owned by Jay Z, another investor and the record labels, according to executives familiar with Tidal’s financials.
In other words, the most important thing for Tidal probably isn’t high-fidelity sound; Tidal may live or die on exclusivity. If it can score exclusive access to popular artists, it’s got a shot to compete. But it’s a late entrant in the space, and it will likely soon have the Apple Corporation to compete with. Music stars don’t have a great track record in the tech space. If Jay Z and company are able to play on their music connections, though, maybe they could change that.