JAY-Z IS NO WIMP – RAPPER’S $56-MILLION BID FOR HD MUSIC STREAMING

Jay-Z has eyed a bigger slice of the music industry pie, with news this week of his move into the music streaming business. The rapper’s company Project Panther submitted a US$56-million dollar bid last Friday, to take over Swedish company Aspiro – owner of music subscription services WiMP and Tidal.

The rise of music streaming services is gaining momentum, from what was once a user curated online radio station (Pandora), to the multi-billion dollar industry of today, with numerous platforms all competing for their subscription dollar. Today, companies like Apple, Google, and Samsung all offer music subscriptions services, the latest of which is Sony’s Playstation Music offering.

It’s a pricey gamble for the astute businessman and rapper. WiMP’s 512,000 paying users is small fries when compared to Spotify’s titanic 15 million users. Tidal’s numbers have yet to be released, but it’s safe to assume they would be significantly less than most other services.

The success of Jaz-Z’s business ventures is well known. His Roc Nation entertainment empire, which he founded in 2008, is now worth a substantial nine figure net worth (according to Forbes), stemming from megadeals with Warner/Chappell, Universal, Sony and Live Nation. Forbes has him listed as #6 in its celebrity top 100 earners, with a US$60-million yearly income and accumulated wealth of over US$520-million. Not bad for a guy who started life on the streets.

Tom Silverman, CEO of Tommy Boy Records was enthusiastic about the $56-million dollar deal when asked by Bloomberg News (link) saying, “That’s pretty cheap for what you’re getting. It’s a great program. It’s ready to go. Jay-Z is magic, he can attract money, and they need money to compete. As of halfway through last year there was only 7.8 million subscribers, we’re probably close to 10 million now. This year we could see that number probably double or triple, because of Apple’s entry into the business. So it’s a very hot area to be in.”

The one advantage that WiMP and Tidal both hold over their competitors, is a better quality listening experience. Both stream High Fidelity music and HD music videos.

High Fidelity music has broken ground in the industry (think Neil Young’s Pono) but has yet to be adopted by the larger listening public. Part of the reason for this has been the high costs associated with it, along with its high data cost – something of which mobile phone users are acutely aware. Tidal battles the data issue by using lossless compression, giving users 1411KBPS compared to Spotify’s Vorbis compression of 320KBPS or iTunes AAC 240KBPS.

When discussing HD music, Tidal’s CEO, Andy Chen, said, “For some reason music is the only format where people accept something worse than before. It’s the 21st century. Technology’s job in our civilisation is to make life better” (source).

It’s true, HD music does sound great, but it also costs a lot more. Currently (per month), a Google Play Music subscription in Australia will set you back $11.99, and Spotify just $9.99. Tidal, which admittedly hasn’t launched as yet in Australia, is priced at US$20 per month of service.

People tend to balk at paying double for a service that most will use only on their phones, or that’s often available for free (with ads included). Added to that, is the many services pre-built into peoples smart phones (Android has Google Play Music, and Beats will be soon pre-loaded into all iPhones), their cars (BMW comes with Pandora) and their taxi services (Uber’s new deal with Spotify).

That being said, if anyone can sell high quality music, it’s Jay-Z.

According to Fortune, the deal is almost done. The Norwegian media house Schibsted, (which indirectly owns a 76% stake in Aspiro), stated it had accepted the offer, while Aspiro’s board has recommended all shareholders agree to the deal (link).

It’s not clear as yet whether Jay-Z plans to integrate WiMP and Tidal into his Roc Nation Records portfolio, releasing the company’s signed artists directly to the platforms. Even if he only released his wife’s music, it would be a massive coup for the service. Beyonce’s unannounced album release last year was the fastest selling album ever on iTunes, with a reported 828,773 copies sold in the first weekend (source). So, it would seem like a no-brainer.

For it to succeed, he will need to raise the cool-factor of high fidelity music to the masses. Although, making the mundane look cool, is something Jay-Z does well.