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Jay Z's Tidal costs too much money to be the future of music

Madonna, Deadmau5, Kanye West, and Jay Z stand on stage at the Tidal press conference.
Madonna, Deadmau5, Kanye West, and Jay Z stand on stage at the Tidal press conference.
Jamie McCarthy

Some of the biggest names in music took part in a press event Monday night to sign a declaration for the future of streaming.

One by one, Rihanna, Jay Z, Beyoncé, Jack White, Madonna, and many other artists signified they would bond together to create Tidal, a site where users could stream music. "Our movement is being led by a few who are inviting all to band together for a common cause, a movement to change the status quo," the Tidal mission statement reads.

Except nothing here is changing at all. Tidal is just a more expensive version of Spotify. That's not the change streaming needs.

The ideal price for profit isn't $20 a month; it's about $6

Tidal features two subscription tiers. There's no free tier, as Spotify has, but Tidal does offer a free two-week trial. In the premium Tidal tier, users pay the same as they would for Spotify premium ($9.99 per month) and receive all of the same benefits: unlimited streaming of whatever song you want, with no ads. Tidal also has a luxury tier called "Hifi" that gives users high-definition audio for $20 per month.

It's hard to believe that listeners will pay $20 monthly for a difference in audio quality that isn't distinguishable through the earbuds most people use to listen to music. But what's even more absurd about the $20 model is that even $9.99 is too high for extreme profits.

Tidal has created a product that, in theory, woos artists by promising them that no one will listen to their music without paying for it in some way. And there's some justification for this thinking. Free streaming tiers, according to the Financial Times, brought US labels only $295 million in the US in 2014, compared with the $800 million created by paid subscriptions. That's a significant difference.

But if Tidal really wanted to make the most money possible for its artists, it would charge somewhere around $6.

According to research done by David Touve, an assistant professor at the University of Virginia, the amount of money streaming services make off the subscription model could be increased significantly if subscription services cost less.

The sweet spot for charging just enough to generate revenue, while still convincing lots of people to actually pay for a streaming service — as he wrote on Rockonomics — was right at £3.99, or about $6 US. "It appears (from the data) that the largest pools of music service revenue — and therefore music service royalties — could be found at dramatically lower prices," Touve wrote.

rihanna Tidal

Rihanna signs the Tidal bill of rights (Jamie McCarthy/Getty)

Tidal is built on the same model as Spotify. That model is deeply flawed.

Not only is Tidal charging too much money to offer almost the same exact product as Spotify, but it's also playing into a couple of problems that already haunt the music industry and cause plenty of headaches for artists.

Both Tidal and Spotify are interactive streaming services that have to play by the same legal and financial rules. They aren't services like Pandora, which pay different types of licensing fees. (For more information about the distinctions in types of streaming, read on here.)

One of the biggest problems interactive streaming services cause for the industry at large is that they function under a veil of secrecy. Every single deal is made directly with artists and labels, and the terms of those deals aren't disclosed. Taylor Swift is on Tidal but not Spotify, probably because Tidal cut her a better deal than Spotify did. An artist without Swift's clout can't negotiate such a deal.

The whole debate about whether streaming is good or bad for artists is what Tidal is using to make the case for its product — but as it stands, the only real difference between Spotify and Tidal is the herd of artists the latter recruited to convince listeners to switch services. So far, Tidal isn't making any industry changes at all.

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