He bought it for $56m in 2015
Transaction will help artist-owned service compete against Apple and Spotify
Tidal has sold a one-third stake in its business to US mobile operator Sprint, as the under-pressure streaming service owned by the rap star Jay Z looks to compete against larger rivals Apple and Spotify in digital music.
Sprint, the fourth-largest US telecoms group, paid about $200m for the stake, valuing Tidal at $600m, according to a person with direct knowledge of the deal. Marcelo Claure, Sprint chief executive, will join Tidal’s board, while Jay Z and the company’s other artist-owners will continue to run the business, Sprint said in a statement. The transaction will give Sprint’s 45m customers access to Tidal as well as “exclusive artist content” that has yet to be revealed, the company said.
The deal gives Tidal a cash boost at a time when it faces intense competition. Jay Z, whose real name is Shawn Carter, bought Tidal for $56m in January 2015 and relaunched the service in a star-studded press conference two months later, in an attempt to tilt the balance of power in the music industry.
However Tidal has struggled to gain traction, despite having high-profile backers such as Beyoncé and Madonna, who own equity in the company. Tidal says it has more than 3m customers — trailing Spotify and Apple, which boast 40m and 20m paying subscribers respectively. “[Tidal] doesn’t have the war chest to go up against Amazon, Apple and Spotify,” said Mark Mulligan, analyst at Midia research. “It’s a crucially important time for them.” The company faces a crowded market as the music industry scrambles to adjust to streaming as the dominant way to listen to music. Streaming has grown rapidly, overtaking digital downloads as the biggest driver of revenue in the US music industry. Revenues from streaming rose more than 50 per cent across the industry last year. Tidal has tried to separate itself from the pack by promoting an artist-first approach, which Mr Carter has said “sets us aside from a tech company selling advertising, or one selling hardware”. The company has also looked to lure new customers through “exclusives” — artists including Rihanna and Kanye West initially released their new albums for streaming only on Tidal last year.
But streaming services are saddled with high costs in royalty fees to record labels, with Spotify, the market leader, unable to turn a profit despite generating €1.95bn in revenues in 2015. Sprint’s move comes after its parent company, Japan’s SoftBank, held discussions with Mr Carter to buy a stake in Tidal, as the FT reported in 2015. The deal fell through and Tidal agreed a partnership with Sprint to distribute the streaming service, although it was not exclusive. Sprint is attempting to differentiate its product offering as larger rivals such as AT&T delve further into content. AT&T offers DirectTV now, a streaming television service, while Verizon has some exclusive rights to NFL games on mobile devices. Sprint shares rose 3.3 per cent to $9.22 at midday in New York, defying declines in the broader stock market. Copyright The Financial Times Limited 2017.