Home Uncategorized What Is Jay-Z’s Radical Idea To Upend The Streaming Music Business?

What Is Jay-Z’s Radical Idea To Upend The Streaming Music Business?

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500_1260292105_jayz
Rapper and business mogul Jay-Z has
an old idea that he’d like to try out on the new music
business. 
Prior to the official announcement of
his acquisition of the Swedish streaming music service
Aspiro, the magnate
held a giant pow-wow with some of the movers and shakers of the
music business
during Grammy week in February.

Guest Post by Bobby Owsinski on Forbes.com

According to a post on Showbiz 411, guests at the meeting
were literally a who’s who of music creators,
including MadonnaKanye
West
, Daft Punk, Nikki Minaj, Chris Martin of Coldplay, Jack
White, Beyonce (Mrs. Jay-Z), two unnamed country music stars
and about 20 other non-musicians ranging from attorneys to
music execs.

The reported reason behind the meeting was to gather
information about how Jay-Z could turn his upcoming streaming
network into something along the lines of the old United
Artists film studio, where the artists themselves had control
of the business and reaped more of the rewards than in the
current mostly-corporate owned system.

Rap moguls Sean “Puffy” Combs, left, and Jay-Z
attend the NBA All-Star basketball game, Sunday, Feb. 15,
2015, in New York. (AP Photo/Kathy Willens)

Jay-Z (real name Shawn Carter)‘s company Project Panther Bidco Ltd
completed its purchase of Aspiro on March 13th. The company
owns the WiMP and TIDAL
streaming networks, one of the few services to currently
provide CD quality streaming.
The network is small with only 512,000 paying subscribers with
only about 20,000 of those subscribed to the high-def tier.
Upon relaunch the network reportedly will be renamed TIDALHiFi.

The purchase seems like a good one from Jay-Z’s perspective.
Paying only about $56 million for a service that already has
infrastructure and subscribers seems like a steal compared with
the estimated $300 million that Apple paid for the Beats Music
service as part of last year’s $3 billion Beats acquisition.
Still there’s plenty of challenges, with services like Pandora
and Spotify already
with a huge head start and deep pocket competitors like Apple
(with its new service built around the Beats Music
infrastructure) and Google (with its YouTube Music Key) set to relaunch later in the
year.

What’s interesting is that even though artists complain about
the royalty rates of services like Spotify, the fact remains
that streaming is a very small margin business, with 70 percent
of the revenue or more paid to the rights holders. It’s not
like these services are drowning in profits (Aspiro lost $5
million in the last three months despite the fact the high-end
tier is priced at $19.95 per month, for example). In fact, it’s
the record labels that these stars are signed to that take the
lion’s share of the money earned.

And that leads to interesting point #2. Most of the
artists at the meeting (except for Madonna, who’s unsigned at
the moment) are signed to Universal Music, so any discussion of
increased royalty rates may end up being moot at the hands of
the label.
Not only that, because of their association
with former Universal head honcho Jimmy Iovine and
uber-producer Dr. Dre (both former principles in Beats and now
Apple executives), one wonders just how many of the attendees
would actually test their loyalties and join a collective that
goes up against a powerful competitor like a relaunched Apple
Beats Music.

The biggest plus in Jay-Z’s purchase of Aspiro is that the
company already has licenses in the U.S., Canada, and many
European countries, which would be nearly impossible to quickly
acquire if he tried to build a streaming network from scratch.
TIDAL also offers more than 75,000 high-definition videos,
which makes it different from other audio-only networks, at
least until YouTube Music Key shows up.

Yet another interesting possibility is that a big reason for
this acquisition could actually be based on ego, with the
driven Jay-Z trying to keep up with Dr. Dre, who obviously
scored large when Apple purchased Beats.

Jay-Z is one smart businessman, but launching a
streaming music network in this competitive environment without
a big marketing budget may prove to be more than even he can
handle.
Even with the help of his superstar friends,
it may prove to be impossible to leapfrog Spotify in the
market, let alone even catch up to it, and the deep pockets of
Apple and Google could eclipse both a flash under the right
circumstances.

As we’ve seen in the past, high-quality audio is almost never
a mass consumer choice, so TIDAL may be up against some long
odds regardless of who’s involved.

– Bobby Owsinski is the author of 24 books on
recording, music, the music business and social media. Read
excerpts at bobbyowsinski.com

 

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