Introduction
The outrage at Jay Z’s newly launched streaming service, Tidal, has been well documented. Death Cab for Cutie frontman Ben Gibbard went after the service, remarking, “this thing is going to fail miserably.” Mumford & Sons were also notably vocal, collectively making fart sounds when they were recently asked about it.
At first blush, Tidal would appear to be just another digital streaming service in an already crowded field with others like Pandora, Spotify, Rdio, Last.fm, Beats Music, Vevo, YouTube, and the like. But Tidal has received vitriol from within the industry in ways that these other services have not. This post examines the failed optics of the rollout, and how that failure is underpinned by the interaction between music law and music business.
How Streaming Works, and Why Tidal Is “Different”
Legally, the structure of streaming is straightforward. The person or people that own the copyright give the streaming service permission to stream their music, and in return receive a royalty every time a song is played. That royalty is almost always fractions of a penny, and currently isn’t tied to any universal standard that sets the rate. Conversely, that’s not how royalties work when someone buys a CD; by statute, a copyright holder gets a predetermined amount for each of her copyrighted songs (to a limit) on the CD.
Typically, a streaming music service is able to pay those royalties through one of two revenue streams: ads that run before or between videos (e.g., Youtube, Pandora), or subscriptions from customers (e.g., Spotify’s subscription service, AmazonPrime). Ads produce a tiny amount of revenue, and monthly subscriptions produce substantially more (but ultimately, not a lot). Napster (and subsequent pirating that has come in Napster’s wake) changed the music consumption landscape; in a digital world, consumers feel entitled to listen to music for free. So the economics of the ad vs. subscriber world is a classic business problem. Lots of people will consume the cheaper option (which is free to them), but that option produces lower revenues for the streaming services. In turn, the companies’ ability to pay royalties is diminished.
And make no mistake about it; some royalty streaming rates are incredibly low. Geoff Barrow, the composer/instrumentalist behind Portishead, recently tweeted that he had made about $2,500 off of 34 million streams. By comparison, selling 34 million physical records would make a record one of the top all-time sellers and reward the copyright holders of the record with millions in royalties. Several months ago, Taylor Swift famously pulled out of Spotify, giving several reasons, including the low royalty rates and Spotify’s ability to hurt her album sales (which she knows generate much more income).
Tidal’s rollout was accompanied by lots of populist rhetoric. Alicia Keys dubbed Tidal “the first ever artist-owned global music and entertainment platform,” and its goal (although details remain scarce) is to substantially increase the royalties it pays artists by adopting the subscription-income model of revenue. Currently, Tidal has two subscription tiers: a $9.99/month service, and a $19.99/month high fidelity service.
The Optics of Music Royalty Representing the Working Musician
Tidal’s rollout looked like a Billboard red carpet: Jay Z, Rihanna, Nicki Minaj, Kanye West, Jack White, Deadmau5, Madonna, Usher, Alicia Keys, Daft Punk, Jason Aldean, and members of Arcade Fire and Coldplay were all on stage to promote the service. The “branding” of Tidal was accompanied by individual hype by several of the artists, and one of the overall goals was to create the appearance of an uprising from within music itself. In one of the hype videos, Jay Z can even be heard saying, “We’re going to change the course of history.”
So far, the revolution has fizzled. Part of the initial failure appears to be business-related, as Tidal is downsizing and just fired its CEO, and part appears to be market-related, as the long-term viability of subscription-based services in a post-Napster world remains dubious. But part of the failure is the artists’ own doing.
Collectively, the individuals standing on the Tidal rollout stage easily have a net worth over $2 billion. The optics of all that money starting a “revolution” for the struggling musician did not play well. Mumford and Sons guitarist Winston Marshall called them the “new school fucking plutocrats.” Speaking for the band, he stated that Mumford and Sons had no desire to be part of “some Tidal streaming revolution,” rejecting the branding of Tidal and instead calling it “just commercial bullshit.” Death Cab’s Ben Gibbard explained further, lamenting the opportunity that Jay Z lost in the rollout:
If I had been Jay Z, I would have brought out ten artists that were underground or independent and said, “These are the people who are struggling to make a living in today’s music industry. Whereas this competitor streaming site pays this person 15 cents for X amount of streams, that same amount of streams on my site, on Tidal, will pay that artist this much.” . . . I think they totally blew it by bringing out a bunch of millionaires and billionaires and propping them up onstage and then having them all complain about not being paid.
There was a wonderful opportunity squandered to highlight what this service would mean for artists who are struggling and to make a plea to people’s hearts and pocketbooks to pay a little more for this service that was going to pay these artists a more reasonable streaming rate, and they didn’t do it. That’s why this thing is going to fail miserably.
Part of the vitriol underlying the Tidal blowback is an understanding of revenue streams for established versus rising artists. For an artist like Taylor Swift, it makes sense to pull out of Spotify. She doesn’t need Spotify to gain fans or listeners; through her official Vevo channel on Youtube, Taylor has well over a billion and a half views in the last twelve months alone. For 2015, her album sales are astronomical. Her tours dot the largest venues in the world and generate millions of dollars in ticket revenue and merchandise sales. And Taylor justified her withdrawal from Spotify in those terms: it doesn’t make sense for me.
The vitriol at the Tidal founders is underpinned by the understanding that all of them are making (lots of) money from non-streaming revenue sources just like Taylor does. Thus, Ben’s criticism hits home: nobody cares if you’re not making money off of streaming because you’ve already made it (and don’t have to worry about money). What about the band that loses money on every tour and has low record sales? What about the rapper that may stop making music because she can’t pay her rent? What about their streaming income?
To their credit, Tidal’s principals have responded. On the heels of the what-about-the-little-guy criticism, Tidal has added “Tidal Rising” to the Tidal service, which is going to highlight up-and-coming artists. Jay Z and Jack White have been personally calling Tidal subscribers to thank them for subscribing. This responsiveness shouldn’t be surprising. One of the very reasons why the Tidal founders are so good at making dumptruck loads of money in the music business is that they are responsive to their fans’ desires. Regardless of whether you like their music, Jay Z, Beyonce, Madonna, Jack White, and Kanye are utterly brilliant at being in tune with their fans.
It remains to be seen whether that responsiveness (and the group’s collective business savvy) will overcome the systemic problems with all subscription-based services. But it appears that will certainly keep trying, and if they are able to overcome their initial stumble, and keep working musicians in the business of making music (and maybe break a few deserving artists along the way), then they should be lauded.