What is Tidal, and can it replace Spotify and Pandora?

Artist-owned and subscription-only, the new music streaming service aims to challenge Silicon Valley-based companies and their stake in the music industry. Can it compete with current business models?

Jay-Z wants to take back the music business.

In a star-studded event in Manhattan Monday night, the rap mogul launched the artist-owned streaming service Tidal, effectively taking a stand against tech companies' stake in the music industry. 

“Right now they’re writing the story for us,” Jay-Z said in a product-launch video. “We need to write the story ourselves.”

Tidal first made waves in January, when Jay-Z announced that he had invested $56 million in Aspiro, the Swedish company that developed the service, Rolling Stone reported.

The idea, the rapper later told Billboard, is to reset the value proposition of music. Artists including Madonna, Beyoncé, Alicia Keys, Jack White, Calvin Harris, Coldplay's Chris Martin, and Rihanna, will each hold 3 percent in equity, while the remaining stakes belong to Jay-Z, another investor, and the record labels, according to the music magazine. 

At the same time, access to Tidal’s database of 25 million songs, 75,000 high-definition videos, and other exclusive content is by subscription only – a denouncement of the free, ad-supported models offered by services like Spotify and Pandora. Tidal users would pay $9.99 a month for standard sound quality, and $19.99 for high-fidelity audio.

The move, The New York Times noted, not only brings both financial benefits for those involved, but is also “powerfully symbolic in a business where musicians have seldom had direct control over how their work is consumed.”

Musicians have long bemoaned how streaming services devalued their music. Months before Taylor Swift pulled all her songs from Spotify, she argued in an op-ed for The Wall Street Journal:

Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It's my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album's price point is. I hope they don't underestimate themselves or undervalue their art.

Subscription-only services would support Ms. Swift’s idea. Tom Silverman, founder and chief executive of the record label Tommy Boy, found in a recent analysis that each user of a paid subscription provided an average revenue of $57 to the music industry, Bloomberg reported.

The figure, according to Mr. Silverman, drops to less than $7.50 per user for digital radio, and under $4 for YouTube, Vevo, and Spotify’s free option.

Record labels, who have also seen a drop in revenue since the advent of streaming, are only too happy to see a move that encourages consumers who stream free content to pay a regular fee.

“We want to accelerate paid subscriptions and raise income and compensation for everyone,” Universal Music chairman Lucian Grainge said at February’s Code/Media Conference. “Ad-funded on-demand will not sustain us or the entire ecosystem.”

Despite the powerful voices behind it, Tidal does face considerable challenges that stand in the way of its becoming the next big wave in music consumption.

As of its March 30 launch the service had 540,000 total subscribers, compared to Spotify’s 6 million paid users in the United States alone. That’s a big disparity, especially considering there are only about 7.7 million users the US subscription streaming marketplace today, according to the Recording Industry Association of America.

Another obstacle could be the price of Tidal subscriptions vis-à-vis what it offers. Bloomberg noted that Tidal’s monthly fee for desktop-only, standard sound quality service is equal to what Spotify charges for ad-free access for both desktop and mobile. Adding mobile service to Tidal adds another $3 to a user's bill, while a mobile, high-definition audio experience would cost $25.99 a month.

Critics, who see the service as a scheme by the rich to make themselves richer, have taken to Twitter to voice their skepticism.

“Streaming services are still having trouble getting people to pay at all – and turning those subscribers into profits,” according to Bloomberg. “If Jay-Z hopes to appeal to people’s sense of justice, he’s probably going to need a better pitch than guaranteeing that Rihanna will get a bigger paycheck.”