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Jay Z's Tidal claims to be the future of streaming. But is it?

Jay-Z performs
Jay-Z performs
Kevin Winter/ Getty

Jay Z is one of the best rappers in the game, but he's also the smartest entrepreneur in music. At a live event Monday evening, he announced the launch of Tidal, a new, luxury music-streaming service.

Tidal is already live and streaming 25 million tracks and more than 75,000 music videos. It's a new name in a sector mostly dominated by two major competitors: Spotify and Rdio, and it's the first-ever artist-owned international music streaming service.

With Jay Z and a slew of artists — including Coldplay, Arcade Fire, Taylor Swift, Kanye West, and Rihanna — having signed on to support the Swedish-based streaming service, Tidal might be able to shift the future of music streaming.

But it has a lot of hurdles standing in its way that even Jay Z might not be able to clear.

screencap of tidal

Tidal is much more expensive than the competition

Tidal features two subscription tiers. There's no free tier, which Spotify has, but it does offer a free two-week trial. At $9.99 a month, the premium tier gives listeners full access to the catalog in standard quality and access to high-definition music videos.

The second tier, the luxurious Tidal Hi-Fi, gets audio nerds the quality they want — lossless, 16-bit Flac files (a compressed audio file that doesn't lose any of the original audio data) — for $19.99 per month. This is an intentional move on Tidal's part to make itself seem like it's catering to artists' financial interests.

Recently, the music business has been swarmed with questions about whether free entry-level options like the one Spotify offers (often called "freemium") cost artists money.

The idea behind freemium services, on the tech side, is that free music works as a kind of gateway drug to get users to pay for premium service subscriptions. On the free tier of most services, you cannot listen to songs in a specified order, and there are ads that interrupt your service. Spotify's freemium model for example, has helped it snap up 60 million users, only 15 million of whom pay for premium.

Labels and artists, in general, do not like freemium models because they rake in much less money than their subscription-based counterparts do. According to the Financial Times, ad-supported free streaming brought US labels $295 million in the US in 2014. That's far less than the almost $800 million created by paid subscriptions.

Some parties want freemium services done away with entirely. A person close to Universal Music told Financial Times that the label didn't want the freemium service on Spotify canceled but did want that tier to have a cap on listening time, much like what Pandora did until 2013 to grow revenue and encourage users to pay for a subscription. For streaming companies, though, free services mean more users, and users are how these companies attract venture capital.

By choosing not to offer a free level beyond the initial trial, Tidal seems to be implying that it is a company run by and looking out for artist interests first and foremost. Whether that will work as a financial model is yet to be seen.

What makes Tidal so luxurious — and worth the money?

Tidal plans to provide listeners with "high fidelity sound quality, high definition music videos, and curated editorial, expertly crafted by experienced music journalists." Run by Scandinavian company Aspiro, Tidal hopes to compete with other traditional streaming services, but it's also trying to corner the market of high-end users whose main complaint about streaming and digital music is that it is often very low-quality.

On its most basic tier, Tidal doesn't sound or look all that different from Spotify. Users can create playlists, set up a song queue, and access songs directly. The only distinctive aspect at this level is the ability to access music videos. This could give artists another platform on which to debut videos, instead of having to use Vevo, the YouTube-based music video site jointly owned by Universal Music, Sony Music, Google, and Abu Dhabi Media. But there's one big difference from Spotify.

Jay-Z and Beyoncé Win McNamee via Getty

Why Jay Z's name matters

Most music streaming companies fail because they lack enough users to offset the massive cost of an extensive music catalog. Currently, the licenses it takes to play a large amount of the popular music canon require an enormous amount of money, especially if you want to launch an interactive streaming service like Tidal.

Interactive streaming services, where users can pick, song by song, what they want to listen to next, have to license music directly with the artists. Instead of paying a blanket fee under the compulsory license (like Pandora does), interactive streaming services have to make deals with individual artists and labels. These direct deals are what made it possible for Taylor Swift to pull out of her Spotify deal in 2014. (Swift's musical catalog, with the exception of 1989, is available on Tidal.)

Licensing is why so many music-streaming startups completely fail, which is why Jay Z's name on this product matters. No other music-streaming service has an artist of Jay Z's caliber as a spokesperson. Jay Z's renown in the industry may convince artists to give this platform a shot.

"There’s only one person with a bigger Rolodex than [Interscope Records founder] Jimmy Iovine, and that’s Jay Z," one source told the New York Post. In 2008, Jay Z launched his own record label, RocNation. He quickly snatched up major musicians like Rihanna and Kanye West to join his venture, and then signed a contract with Sony Music. It gave him credibility as a businessman, but it also gave him a network of people who trust him.

Just look at this video Tidal released Monday at noon as a teaser for the live announcement event:

TIDAL | #TIDALforALL

Louder than words. The revolution is coming. Turn up. #TIDALforALL

Posted by TIDAL on Monday, March 30, 2015

Jay Z seems to have had no problem recruiting artists to put their music on Tidal, and the platform seems ready to be more than a listening service. It also aims to take music curation to another level, with top-10 lists featuring new and worthwhile artists.

Ultimately, Tidal is a musician's music player. The payout seems higher, the interface is fine, and there's a level of sound quality that will interest the audiophiles of the world.

Whether that can survive after the initial publicity blitz will be left up to listeners.