Jay Z hasn’t found a new owner for Tidal, his streaming music service. But he’s getting closer.
Jay Z is selling a third of Tidal, which makes sense. Sprint is buying a third of Tidal, which makes less sense.
The music service is now worth a reported $600 million.
Jamie McCarthy/Getty Images for TIDAL
Peter Kafka covered media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.
Sprint says it has bought a third of Tidal; Billboard says the carrier is paying $200 million for its stake, which pegs Tidal’s value at $600 million.
Sprint and the music service aren’t offering any other details, except that Sprint customers will get “exclusive artist content not available anywhere else” and that Sprint CEO Marcelo Claure will join Tidal’s board.
Jay Z has been shopping Tidal for at least a year — Samsung, which seemed like a logical buyer, kicked its tires for a while, then walked away; everyone else gave it at least a look — so it’s logical to assume that this deal gives Sprint a “path to control”: The ability to buy a majority stake in the company over time.
It’s also logical to see why he’d want to get out of the streaming business, which he entered by buying Aspiro, a Swedish streaming company, for $56 million in 2015: Everyone in the streaming music business loses money.
That doesn’t matter to tech giants like Apple and Amazon, who use music to promote other products. It also doesn’t seem to matter to bigger streaming music companies like Pandora and Spotify, that have investors willing to bet that they’ll figure out how to turn a profit, one day.
But if you’re Jay Z and you’re running a small scale streaming business — Tidal claims it has three million subscribers, though those numbers have been disputed — then you’re either funding those losses out of your pocket or getting someone else to do it for you. So an early exit would have always been part of the plan.
It’s not surprising to see Sprint bet on streaming. Sprint’s owner SoftBank has long been interested in music, and at one point tried to buy Universal Music, the world’s largest music label.
It is harder to see what Sprint gets out of the deal.
Yes, it can use Tidal exclusives as a marketing sweetner. But this is the same issue that AT&T has if/when it buys Time Warner: All of the content that makes the entertainment company valuable only has value if everyone can get to it, regardless of which carrier/cable company they use.
That is, you can make, say, a single Jay Z track exclusive to Sprint customers. But if you lock up all of his music on a single carrier, then the overall Jay Z market is going to get much, much smaller than Jay Z likes.
Meanwhile, you certainly don’t need to buy a streaming music service to do a promotional deal with a streaming music service. All of the carriers have done variations on this, for years, without taking equity stakes.
Here’s a good hunch: In a year or so, Jay Z will have sold the whole thing to Sprint, which will be left trying to figure that problem out for itself.
This article originally appeared on Recode.net.
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