Polarizing as he may be, Kanye West is clearly one of the biggest superstars in music today. So when his latest album The Life of Pablo was released exclusively on Tidal, it immediately became a fascinating case study on the future direction of the music industry. The music streaming service was effectively dead on arrival when it launched in April last year, but with big-name stakeholders like Jay-Z, Beyonce, Rihanna, Coldplay and West behind it, it was only a matter of time before they started throwing their combined star power behind the service in hopes of jumpstarting it.
That’s apparently what we’re seeing now, with West’s newest album being the biggest example of this. Much like Netflix’s (NFLX) strategy, Tidal saw the need for exclusive content to differentiate its subscription service from its competitors. Unlike Netflix, though, Tidal was playing catchup from the beginning.
By the end of 2015, Spotify had already amassed over 28 million paying subscribers and was reportedly on the verge of hitting 100 million total subscribers. For what it’s worth, Spotify has repeatedly said it doesn’t believe in the exclusive strategy. Apple Music (AAPL) was also a deep-pocketed new entrant with explosive growth, reaching 11 million paid subscribers from when it launched in June 2015. Pandora (P), SoundCloud, and a host of others had also already carved out their piece of the market. So even by the most generous estimates, Tidal’s total user figure comes in at only a fraction of its competitors.
Tidal’s Competitive Edge Is…
Also unlike Netflix, Tidal’s exclusivity isn’t that exclusive. Prior to West’s TLOP, Tidal also had the exclusive releases of Rihanna’s newest album Anti—which dropped in January—and Beyonce’s latest single “Formation” during Super Bowl 50. For those keeping track, that’s three major Tidal exclusives in the last month.
But as Gizmodo’s Alex Cranz pointed out, the wave of interest came and went with the tide. After spiking to the top spot in Apple’s App Store, Tidal’s downloads are already starting to wane. What’s more, the strategy of exclusivity also sparked an intense backlash from West’s fans, culminating in TLOP becoming the most pirated album of all time, with over 500,000 illegal downloads within the first day of the album’s release. And as the Gizmodo article pointed out, even without the pirating, Tidal would need an untenable amount of exclusives to maintain the type of growth it needs just to catch up to its competitors with this strategy.
It creates an existential moment of sorts for Tidal. Why does it exist? What exactly is its purpose? Who is it actually serving? Actually, Tidal has been quite upfront on that from the very beginning. Looking back to the high-profile press conference when it launched, with all the big name artists standing on stage, the messaging was pretty clear. Tidal exists to pay big-name musicians more money for their art. That’s all fine and good, and far be it for anyone to criticize anyone trying to make an honest dollar. But to achieve its goal, Tidal has been attempting to manufacture a need to meet its service, not vice versa. So it’s no surprise that the strategy has failed to resonate with consumers.
Is Tidal Creating Value?
While exclusive promotions aren’t uncommon in the music streaming industry, when you look at the most successful companies in this space—at least in terms of total number of users—their approaches sharply contrast that of Tidal.
Spotify and Pandora have stood hard and fast with accessibility to its content library. Companies like SoundCloud and 8tracks promote a collaborative and social experience to music, encouraging its users to share, create and discover with other users. When you create a service that people actually enjoy, as opposed to withholding something they want, it establishes value. Consumers get that. Fans get that. So much so that, in the case of 8tracks, about 29,000 people invested $25 million to help fund the company’s growth. Why? Because they actually liked what they were doing and believed in it, not because they had the exclusive rights to some artists’ album.If Tidal doesn’t understand that soon, it’s only going to end up getting washed up.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer