Yesterday the WSJ reported that sources indicate Apple is in ongoing exploratory talks to buy Jay Z’s Tidal music subscription business while carefully noting sources say talks may not lead to a deal. While Apple reportedly talking to Jay Z’s Tidal does not equal Apple actually buying Tidal (yet), the idea of Apple buying Tidal anytime soon and within two years of spending $3 billion on Beats in part to build its Apple Music streaming service comes as a surprise to many — not unlike the Beats episode…
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If we’re comparing Apple potentially buying Tidal to when Apple shocked everyone and actually bought Beats, there are already similarities.
Beats Music was a streaming music business under the umbrella of Beats by Dre, the Dr Dre-owned company behind Beats-branded headphones and speakers. In its current form, Tidal is owned in part by rap artist Jay Z. Beats Music came out of Beats’ MOG acquisition, and Tidal as we know it today is the result of Jay Z acquiring the company.
Tidal also has a (relatively) small user base at around 4 million paid subscribers compared to Apple Music’s 15 million and Spotify’s 30 million. Beats Music was pretty fresh as a service when it was bought and was only believed to have around 250,000 subs.
The Apple buying Beats storyline started similarly too. The Financial Times reported that Apple was in late-stage talks to buy Beats Electronics and Beats Music on May 8, 2014, then Apple officially confirmed its plans a few weeks later on May 28, 2014 before the deal closed in August.
Keep in mind that Apple (including Steve Jobs, Tim Cook, and Eddy Cue) had an ongoing relationship with Jimmy Iovine even before the acquisition so a potential deal with Tidal could take longer, although the business on the surface seems simpler (and surely cheaper) than Beats. One report valued Beats Music at around $500 million of the whole $3 billion that Apple paid for the whole package.
As for price, Jay Z dropped $56 million on Aspiro which ran WiMP and Tidal in March 2015; a similar deal wouldn’t begin to touch Apple’s $200 billion cash reserve. At the time, WiMP (the standard definition music service) was said to have about 512,000 paying customers with Tidal (the high definition music service) carried about 20,000 paid subs. Jay Z later accused Tidal’s former owners of overstating the number of subscribers the service had. Tidal said in March it reached 3 million subscribers.
But does Apple buying Tidal after it already bought Beats Music and launched Apple Music make any sense? We sometimes think of ‘makes sense’ or ‘doesn’t make sense’ as ‘sort of expected’ and ‘wow that’s surprising’ when we process news and possibilities.
Applying that logic, I’d argue that if Beats Music had bought Tidal, it would have made sense. Now think of this as Beats Music (now Apple Music) buying Tidal with Apple’s cash. 15 million subs for a service that’s preinstalled on iPhones compared to at least 3 million Tidal subs and growing and 30 million paid Spotify subs. They’re in the same leagues in some ways.
If Apple did buy Tidal, though, it probably wouldn’t be about spending money to acquire Apple Music subscribers; Apple is already on a positive trajectory and not all Tidal customers would stick around.
But with that same line of thinking (Apple Music, not Apple per se, buying Tidal), consider Jimmy Iovine’s role in Apple Music and Jay Z’s claim that Iovine tried luring artists from Tidal:
My thing with Jimmy is, “Listen, Jimmy; you’re Jimmy Iovine, and you’re Apple, and truthfully, you’re great. You guys are going to do great things with Beats, but … you know, I don’t have to lose in order for you guys to win, and let’s just remember that.” Again, I’m not angry. I actually told him, “Yo, you should be helping me. This is for the artist. These are people that you supported your whole life. You know, this is good.”
There have been some misses: Jackson lost a bid to sign Kanye West to a deal for his album The Life of Pablo. Iovine says that West pulled out of the talks and gave the album to Tidal, which he co-owns with Jay Z and other stars. “He wanted to work with his friend, in the end,” Iovine says. “It’s that simple.”
Focus on Jimmy Iovine’s Apple Music specifically and not just Apple as a whole and it sort of feels like one record label swallowing another. So that’s how I’m looking at how this could go. But why?
Apple buying Tidal isn’t Apple buying Beats. Beats got Apple an already successful audio hardware company, a strong marketing team, and most importantly, jump started Apple’s entry into the streaming music service business.
With Tidal, there may be more to the business than what’s on the surface, but at first glance the service is really just a nuisance to Apple Music. Artists go there exclusively that could have gone to Apple Music exclusively. But why pay them to basically go out of business as an alternative to Apple Music rather than let Tidal run its course and possibly fizzle out on its own by applying competition in the market?
My initial thought is that Apple may want to buy Tidal so that someone else doesn’t. Apple buying Tidal may not change the streaming music landscape, but Google or Amazon or Facebook buying Tidal might.
Think about the perception that could create: it’s Apple buys Beats to catch up all over again. Samsung was rumored to be in this same position for a short period. And Spotify buying Tidal certainly wouldn’t help Apple Music. Plus it doesn’t hurt Apple to basically buy what some have described as the artist’s union.
With all of that in mind, note that yesterday a Tidal spokesperson said no such talks with Apple have happened and a New York Times reporter said similar.