Music industry

What Square’s $302 Million Acquisition of TIDAL Means for Its Music Industry Ambitions

Jay Z is “99 problems” free since the closing of Square’s $302 million acquisition by TIDAL. The financial services platform has acquired an 80% stake in TIDAL, as well as licensing deals with major record labels and recording artists involved with the company. Square
SQ
wants to diversify its portfolio by taking advantage of TIDAL’s existing cultural fanbase, and of course its Cash App platform has seen success thanks to hip hop influencers. TIDAL’s most recent reports from 2018 showed a loss of $37 million, but perhaps there’s something bigger at stake here for music streaming and artist rights?

The breakdown you need to know:

Even though the deal was previously announced in March, Dorsey and Jay-Z just closed the deal on Friday and solidified what could become the next major record label and music streaming platform. Square has the capital to spend, with Square reporting $3 billion in revenue in Q3 2020 along with $794 million in gross profit. It’s important to remember that TIDAL didn’t take off as some would have imagined, but its existence is a cultural milestone that can’t be denied. Jay-Z acquired the company in 2015 for $56 million, and at the time, TIDAL was valued at $600 million two years later. CultureBanx noted that while big platforms like Spotify stay ahead with massive sales, Jay-Z has managed to make TIDAL culturally relevant. This cultural relevance also played a big part in Square’s appeal.

Then there’s Cash App, your rapper’s favorite Square-owned smartphone payment and money transfer service has proven to be his cash cow, raking in $849 million in gross profit in 2020, and worth now $40 billion. First established in 2013, Cash App’s valuation is nearly two-thirds of Square’s current $65 billion market value.

A major part of Cash App’s growth is its use of hip hop influencers, who have done wonders to help the platform acquire new customers. About 200 hip-hop artists verify the Cash App name in their lyrics, according to the Genius music database. This is where TIDAL and its roster of rap stars can come in to help Square have a bigger stake in the music industry.

Cash, Culture & Music:

Rappers have been using the fin-tech platform as a way to engage with fans for quite some time now. So it’s easy to see how hip-hop influencers and their loyal followers grew Cash App’s monthly active user count from seven million in 2017 to 30 million in 2020. Square, via Cash App, already has a taste for music streaming companies through its partnership with Spotify, which allows fans to pay artists directly through its platform. Maybe that’s something Square will do with artists on TIDAL as well.

Interestingly, there’s a plethora of things Square could leverage from its new holding company to get a bigger stake in the music business. Perhaps the company, or one of its subsidiaries like Cash App, might be interested in fully entering the industry with its own record label. The crazy thing is that Square has the capital to make something like this a reality, and Jay-Z owns his own record label, so that would come full circle on this deal between TIDAL and Square.

Cash App Records? :

Let’s not forget that the artist-owned, Jay-Z-backed streaming company had been under scrutiny since its inception, despite a $200 million injection from Sprint.
S
in mid-2017. Reports that it manipulates user feeds, fails to pay royalties on time, and lies about subscribers, have not helped TIDAL’s “by artist, for artist” narrative. Meanwhile, he has remained a relatively small player in a fierce industry where topdog Spotify has 155 million premium subscribers. TIDAL is estimated to have over one million paid subscribers. If Square harnesses the power of Cash App and its new backdoor into the music industry, it could create one of the biggest record labels and music streaming platforms at the same time.