Christmas came in March for Tidal, the increasingly irrelevant, money-losing music streaming service, and Jay-Z misadventure. Square, the digital finance company co-founded and led by Jack Dorsey, will pay nearly $300 million and acquire a majority stake in the company. But why, would Square do this?
It’s a bit of a head-scratcher. One could argue that it makes perfect sense — or that it is utter nonsense.
In a string of tweets and a corporate press release, Dorsey points out that this acquisition “extends Square’s purpose of economic empowerment to a new vertical: musicians.” The official argument is that musicians, as entrepreneurs that are essentially operating small businesses, need a newer (and digital) way to monetize their work and audiences.
“It comes down to a simple idea: finding new ways for artists to support their work. New ideas are found at intersections, and we believe there’s a compelling one between music and the economy.”
Dorsey is right — the artist and creator ecosystem is broken. Musicians are looking for better ways to make money. These include everything from actually being paid for their music, to live performances, and merchandise (or “merch,” as the kids call it). Square hopes that it can use its Cash app as a platform for payments for artists.
All the streaming companies know that there is an opportunity to help musicians, though they tend not to be as focused on that as some might like. Spotify sees a pot of gold in podcasts. Apple wants to sell AirPods. I don’t know what Amazon Music wants. Interestingly, YouTube sees the opportunity and has been working with musical artists on commerce.
Joining forces with Tidal may help Square get into the merch world, which may be more pandemic-proof than other aspects of the music business. The Wall Street Journal recently pointed out that “merch that commemorates online events can build communities as effectively as old-school concert T-shirts.” In that story, Ed Aten, founder and CEO MerchBar, a merch-commerce platform, observes, ”When all of those things got put on hold or canceled, [merch] was the only person sitting at the table.”
So, when concerts come back, if Square’s Cash App can be used for in-person transactions, it could be a win for the company. But despite the well-reasoned, logical arguments, I have a hard time buying that this vision will translate into reality. One question I keep coming back to: If this is such a vast opportunity, why would Square lock itself out of the possibility of working with Spotify (not to mention the whole slew of other services)?
Or perhaps this is simply a way to ride a hot trend. As Peter Kafka of Vox pointed out:
Given Dorsey’s love of All Things Blockchain, and the current mania over NFTs, it won’t be surprising to see Square + Tidal work on their own NFT scheme.
Ultimately, even if you are a total believer in the bull case for Square and Tidal, it is still a very expensive acquhire. Granted, other companies have spent more. Bret Taylor came to Salesforce via a $750 million deal for Quip. Apple spent a few billion buying Beat (headphones) and Jimmy Iovine. Can Jay-Z and the new head of Tidal, Jesse Dorogusker, make it all worth Jack’s while?
We’ll see. If nothing else, it’s an interesting distraction.
March 4, 2021, San Francisco
