Tidal Case Study: Integrated Communication Management by Meagan Meeks

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Integrated Communication Management: Tidal Case Study

Meagan Meeks, Joy Barnett, Abel Ibarra, Jannice Truong Moody College of Communication University of Texas 2015

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

A. Title and Introduction When Tidal launched as the first high fidelity, lossless music and HD video streaming service on the morning of March 30, 2015 with some of the biggest names in music rallying behind it, the buzz was palpable. Owner and billionaire music mogul Shawn “Jay-Z” Carter bought Tidal for $56 million from existing Swedish music company Aspiro (The Guardian) and it became Jay-Z’s Tidal in an already crowded digital music market, full of formidable powerhouse brands, where right away, he’d have to make a huge impact. His 16 founding artistshareholders – Alicia Keys, Win Butler and Regine Chassagne of Arcade Fire, Beyoncé, Calvin Harris, Chris Martin, Daft Punk, Deadmau5, Jack White, Jason Aldean, J. Cole, Kanye West, Madonna, Nicki Minaj, Rihanna, and Usher (“Who Owns Tidal?”) – were sure to help capture the attention of audiences and the media, but despite impassioned, hopeful words about “a moment that will forever change the course of music history” (“Jay-Z’s Tidal Opening Official Launching”) Jay-Z and the founders got negative publicity and ridicule for the press conference following Tidal’s official announcement (Deen). Described as music’s “top 1%,” these charttopping artists from the most popular music genres hadn’t drawn users to Tidal, but instead, turned them off and garnered lots of criticism for seeming out of touch with a brand message that was convoluted, contradictory, and felt contrived (Mapes). Jay-Z knew that he had a service unique from all of his other competitors, but making direct comparisons to a couple of them like Spotify and Pandora had actually backfired by raising awareness of those companies instead (Lowrey). Other digital music competitors included Apple (with both iTunes and Apple Music, their collaboration with Beats by Dre), Google Play Music, and Amazon Prime Music, all of whom are also among some of the world’s most valuable brands through their other market endeavors like cell phones, search engines, and retail warehouses, respectively (Badenhausen). Jay-Z started this campaign with the intention of

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

telling the world about ALL the ways that Tidal was better than its competitors and sharing his vision of a fairer music industry that benefitted the artists, consumers, and record labels – and Tidal, of course – but instead he and Tidal’s artist-shareholders found themselves in a position they didn’t anticipate. It’s expected that business ventures are not immediately profitable, but in a fast-paced digital market, Tidal may not have the luxury of waiting for success. Chief Investment Officer, Vania Schlogel asks for patience as they “continue to evolve” (Hampp), but despite her public confidence, Jay-Z may be concerned that media outlets will re-evaluate their opinions and reviews of the service on the one-year anniversary of the press conference, and hopes for a different tone of coverage by then. Redeeming the service in the eyes of consumers, many artists, and in the media would be a tall order, but Jay-Z would have to do all of it to remain competitive against more well-established brands.

B. Background: Company, Industry, and Competitors Tidal was originally launched by Aspiro, a Norwegian/Swedish company in 2014. However, in 2015, Aspiro was acquired by Jay-Z’s Project Panther Ltd., and a major marketing campaign was created to re-launch Tidal (CITE). Promoting it as the first ever artist-owned streaming service, Jay-Z partnered with sixteen other recognizable musicians who are all coowners or stakeholders in Tidal. The company sells a subscription-based music streaming service that combines top-quality, lossless audio and high-definition music videos with editorial content for a full music experience. To distinguish itself amongst competitors, Tidal promises its customers high-fidelity audio and exclusive, curated content from artists, contributors, and other music aficionados.

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Tidal’s business model is the same or similar to that of other streaming service competitors in that they all operate through either in-service advertising ad supported services or subscription services. Tidal’s business model stands apart as a subscription-based business model that limits free streaming, and incentivizes paid subscriptions through exclusive offerings and diversified consumer experiences with higher quality streaming formats. Tidal offers two paid subscriptions for customers and, with the exception of a 30-day limited trial period, no free promotions because Tidal and its owners think the free alternatives have damaged the overall value of the music industry, which it plans to rectify through “support[ing] the artists, creat[ing] a sustainable music industry, and deliver the high quality music and experiences that fans crave” – for a fee ("Why Does The World"). TIDAL Premium costs $9.99 per month, while TIDAL HiFi is $19.99 per month, with the added benefit of high-fidelity sound. A handful of Tidal’s competitors allow free listening supplemented with advertisements between tracks, where Tidal does not interrupt listeners with ads. A competing music streaming service revealed data that showed past business models and proved the percent of streams are nearly equal between free and paid subscriptions, whereas the percent of revenue for paid subscriptions is significantly higher than free subscriptions ("Why Apple Music and Tidal"). As noted earlier in the case, the central issue for Tidal is distinguishing itself among the competition it faces, which is vast and well-established. Exhibit 3 details the significant digital streaming music competitors and their service features. As also previously noted – three of Tidal’s major competitors are also brand giants Apple, Google, and Amazon with their branded services iTunes and Apple Music, Google Play, and Amazon PrimeRadio, respectively. Apple’s prominence in the mobile device wars and industry innovation as the creator of the iPod and iTunes gives them brand recognition and saturation that puts them ahead of the pack. Amazon is familiar to consumers who associate it with cheap, fast quality due to their retail warehousing

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

dominance that has begun to innovate in streaming, downloading, and delivery options to consumers in the physical and digital space. Google’s ownership of Android brings them immediately brand-loyal consumers and pits them directly against Apple in splash-over effects from the strongly-contested device wars, but Google is also the premier brand for search and search-related advertising, as well. Along with the aforementioned services and other established competitors like Rdio and Spotify, Tidal will also have to compete with new major players such as YouTube’s Music Key, a streaming service providing “millions of official videos, album tracks, concert clips, covers, and remixes” ad-free ("Music Key Beta") and Apple’s recently unveiled subscription service, Apple Music, that launched worldwide on June 30 as a “revolutionary streaming music service, a pioneering worldwide live radio station from Apple broadcasting 24 hours a day and a great new way for music fans to connect with their favorite artists” ("Introducing Apple Music”). A sense of community also seems to have some influence in the digital music market with many creating sharable aspects or ones that encourage interaction. Rdio is a competitor which offers easy access to new releases and is “geared and tweaked towards those continually looking for new music,” and so features a good social aspect and great design (Hayes). GooglePlay features a service that allows free uploads of local music by independent artists. Spotify is used by the majority of the music streaming population, and offers exclusives along with a built-in messaging service allowing users to send and recommend songs to their friends (Hayes). As stated in Mintel’s Streaming Media UK 2015 report, growth in the music streaming market will be substantial enough for services to make significant gains over the next few years and because of this, Tidal may have an opportunity to attracting users new to the market, rather than those already settled with a streaming provider (Davies). Within the paid stream category there is “substantial untapped potential for growth” (“IFPI Digital Music Report”), and with so much competition in the market, anyone can seize that potential.

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

With a user base that exceeds fifty million and a paying subscriber population of twelve and a half million, Spotify has established a loyal consumer base in fifty-eight countries, has an extensive library, and differentiates itself from Internet radio services by marketing its interactive features (Seabrook). As one of Tidal’s most significant competitors Spotify has had the competitive advantage for a number of years, but the benefits Tidal claims to offer to the artists is a pivotal point that could put Spotify at risk. Tidal promises artists higher royalty rates than the other streaming services. While Tidal has the backing of major artists, which gives it a slight advantage, they have been criticized for failing to represent up and coming artists - and this is where one of Tidal’s weaknesses lies ("Why Apple Music and Tidal"). Tidal puts the issue of artist compensation and representation front and center in their branding, but according to Mintel’s Music and Video Purchasing UK 2014 report, only 7% of consumers who do not yet subscribe to music services say they would be more likely to sign-up if reassured that artists were being paid fairly (Davies). Because of this low percentage, Tidal will have to be strategic and creative with how make this benefit as important to them as it is to their consumers or adjust where necessary to compete effectively. The characteristics Tidal has been marketing in order to set itself apart from other services could be less appealing to consumers than they planned. If more artists boycott Spotify due to the appeal of Tidal’s higher royalties, which is a real possibility as many popular artists have spoken against their music streaming for free on Spotify and other services, Tidal could win a huge battle on that front (Sherwin). Spotify contradicts the artist’s criticism of free streaming with paid support options with their belief that “without a ‘freemium’ model, piracy will rule the day and no one will make any money at all” (Goldstein). If artists do begin to boycott Spotify and give sole rights to their albums to Tidal, then Spotify’s competitive advantage could be at risk and up for grabs. Although there are many strong competitors, there are also new growth opportunities on the horizon in the music streaming

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

world as mentioned, which means that there is a way, a plan or a model that could give Tidal the competitive advantage if they can figure out how to get there. As the underdog, it’s not just enough for Tidal to offer attractive benefits to consumers; they need to create a marketing plan that offers consumers benefits attractive enough to encourage them to switch to Tidal from a more familiar competitor. Figures 1 through X show show the major findings of primary surveys randomly administered to a variety of consumers (80 total) on their digital music streaming preferences. Figure 1 shows the respondents’ gender breakdown. Figure 2 indicates respondents’ ages and number within each age group. Figure 3 details the percentage of respondents falling into each ethnicity category. Figure 4 addresses the percentage of respondents who had heard of Tidal. Figure 5 shows how often respondents indicate they listen to music. Figure 6 shows what percentage of respondents subscribe to certain services. Figure 7 explains what percentage of respondents would consider using Tidal. Figure 8 categorizes how much respondents would consider paying for streaming service. Figure 9 reveals features valued by respondents. Figure 10 shows how respondents answered when asked what they knew about Tidal, what level of awareness they had or what came to mind when Tidal was mentioned. When it comes to the attractive benefits Tidal may have to offer to certain consumers, they must also win over the artists who can provide them. For the “vast majority of artists and musicians who might be interested in getting in on such a service”, all Tidal is promising is that the “16 artists you see in [the launch] video, artists for whom record sales and streaming probably account or a very small piece of their total profit-pie, will have a 3 percent equity in the service” and “the reality is that most of this money isn't going to the artists… it goes to the record labels” (Goldstein). When Tidal was initially launched, several successful musicians like Ben Gibbard (Death Cab for Cutie), Marcus Mumford (Mumford and Sons), Lily Allen, and others actually spoke against the service and its artist-shareholders (Schneider).

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Winning over or at least quieting the concerns of other musicians will be necessary to gain the public trust if being owned by & beneficial to artists, as well as providing more (and exclusive) artist content is a priority for them. Considering these factors, Tidal is looking to overcome nearest competitor, Spotify by attracting artists and consumers alike before the Apple Music juggernaut wins hearts and overshadows the benefits provided by each of them, becoming yet another significant and formidable hurdle to Tidal’s future success in the market.

C. Key Issues, Challenges, and Opportunities As a drug-dealer-turned-rapper-turned-CEO-turned-billionaire, Jay-Z was used to having to overcome adversity to succeed (Leonard). Considering the competitive, consumer, and branding issues, Tidal’s underdog status in the market was no exception. It was clear that Tidal had neither resonated with, nor struck the right chord with its publics, so how to affect a change was the immediate goal. Because Tidal only quotes 900,000 subscribers (Leonard), markedly less than competitors with user numbers as low as the lower millions and as high as double digits of millions (Software Insider), they had to increase this number significantly to truly show signs of life, and doing so would require a shift in consumer attitudes toward their company. With different outlets reporting different unique selling propositions for Tidal, from “music [at two service tiers, both] streamed at a higher quality than any other service” (Daly), to it being “artist owned” and “provid[ing] additional content (such as pre-releases and demos) and ways for artists to directly communicate with listeners” (Taylor), it is obvious that a clearer statement of Tidal’s key benefit to consumers is necessary to see improvement in both subscriber numbers and public attitudes. Backed by so many of music’s most successful artists, three of whom rank among the richest recording artists (Vasel), the entire team including Jay-Z could afford to provide all of the

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

capital necessary to achieve these objectives and make Tidal a successful venture, even if they only sacrifice or temporarily liquefy some of their rumored 3% equity in the company (Gervino). Determining the message necessary to for Tidal to reach, influence, and initiate purchase decisions from the consumers is a top priority. Tidal’s own branding has included a barrage of messaging thus far with the fanfare and ceremony of signing a Tidal “declaration” at the press conference, the release of a 2-minute brand anthem video, and print ads detailing every benefit that Tidal claims as shown in Exhibits 2.1 – 2.3. Because consumers report a general satisfaction with their existing streaming music services, and only want small changes (Hogan), Tidal must find a way to create and implement messaging that makes them more attractive than other options, despite being the newcomer to the field. Considering the shifting trend in digital music from less downloading to more streaming as detailed by the International Federation of the Phonographic Industry’s 2015 Digital Music Report, the industry is changing and Tidal enters at a crossroads, in prime position to shift in the direction that consumers drive the market. Jay-Z and the founding artist-stakeholders have financial interest in Tidal’s success, but more than that, they have their reputations as artists. Tidal leveraged those artists’ success to bring credibility, capital, and an immediate fan base to the service, but have learned that the backing artists and their multitude of mixed messages from the press conference to the assorted advertising media may have instead undermined their public unveiling, and subsequently, Tidal’s future in the digital market. As a new entrant to the digital market, Tidal isn’t expected to top huge industry leaders immediately, but the pace of the Digital Age requires quick action to affect change before they’re outshined and outperformed. Competing against the huge brands involved in the Digital Music Wars requires providing consumers with something those brands can’t, and effectively communicating what that is before expecting them to change their habits. There are opportunities

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

in the market that can facilitate a shift in who the major players are and where the greatest benefits to consumers lie, but opportunities like these are few and far between, so once they pass, they may be gone until the next technological shift. With the right approach, Tidal believes things can change, and wants to set the wheels in motion now to ensure that they are on the path to becoming a new industry leader and that their anniversary press conference can be scheduled as a celebration rather than found to be a flop.

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Exhibits & Figures Figures – Primary Research Tables & Graphs

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Figure 10

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Exhibit 2.1 – Tidal Official Launch Press Conference 1

Exhibit 2.2 – Tidal Brand Anthem Short 2

1 2

http://www.youtube.com/watch?v=_rfgFJvbY7A http://www.youtube.com/watch?v=cYYGdcLbFkw

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Exhibit 2.3 – Tidal Print Ad 3

http://www.ifpi.org/downloads/Digital-‐Music-‐Report-‐2015.pdf (p. 16)

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Exhibit 3 – Digital Streaming Music Service Comparison Chart 4

http://www.theverge.com/2015/6/30/8863315/streaming-‐music-‐service-‐comparison-‐apple-‐music

Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

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Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

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Joy Barnett, Abel Ibarra, Meagan Meeks, Jannice Truong ICM Case Study – Tidal

Taylor, Ben. "Jay-Z’s Tidal Service Receives a Lukewarm Reception." Smart DNS. 1 Apr. 2015. Web. 11 Aug. 2015. https://smartdns.com/blog/643/jay-zs-tidal-service-receives-alukewarm-reception/. Vasel, Kathryn. "10 Richest Recording Artists in the World." CNNMoney. Cable News Network. Web. 11 Aug. 2015. http://money.cnn.com/2014/12/02/luxury/richest-recording-artists/. "Who Owns TIDAL?" TIDAL. Web. 11 Aug. 2015. https://support.tidal.com/hc/enus/articles/203055651-Who-Owns-TIDAL. "Why Apple Music and Tidal are the right business models with the wrong optics." The Trichordist: Artists For An Ethical and Sustainable Internet. N.p., 22 June 2015. Web. 11 Aug. 2015. http://thetrichordist.com/2015/06/22/why-apple-music-and-tidal-are-theright-business-models-with-the-wrong-optics/. "Why Does The World Need Another Streaming Service When There Are Already So Many Choices Available?" TIDAL. N.p., n.d. Web. 11 Aug. 2015. https://support.tidal.com/hc/en-us/articles/202992442-Why-does-the-world-need-anotherstreaming-service-when-there-are-already-so-many-choices-available-.