Why Piracy Could Topple Tidal’s Competitive Edgeon April 8, 2015 at 2:16 pm
The streaming music market is a competitive space, ruled for the moment by Spotify but with new services entering all the time. Last week was the turn of Tidal, a Jay-Z backed venture with significant artist power behind it, as the star-studded press launch involving Beyoncé, Madonna, and many more demonstrated.
Among the new platform’s distinguishing competitive features, high quality “lossless” audio and exclusive content are the most compelling. Unfortunately, the latter faces major competition itself, albeit from an illegitimate source, as piracy sites thrive on the promise of content that’s expensive, restricted, or both.
Turning the Tide of Music Streaming
From the artist’s perspective, the promise of Tidal, or Apple’s take on Beats, or indeed any new streaming service, lies in the ability to bring Spotify to the negotiating table. The Swedish company is to be applauded for its progress in bringing streaming to the masses, but the payments have always been questioned by musicians.
There has been room to maneuver up to now, thanks to the early adopter stage of the market and the relative strength of sales from digital downloads. With the market maturing and download revenues now declining, however, there is increasing pressure for Spotify to justify its rates, perhaps even its business model as a whole. Taylor Swift did her part to kick start that conversation late last year, but in reality it requires a sustained business threat to force Spotify out of its current market-leading comfort zone.
Tidal and its array of exclusive talent could be that competitive force, but for one lingering and all too familiar hurdle: the piracy option.
Piracy is obviously no new concern for the music industry. For a new service trying to distinguish itself in a very homogeneous market, however, unlicenced music could prove a much quicker killer than the drawn out death it has brought to traditional music sales.
If the only place to access Madonna’s latest is on Tidal, for example, a whole new demograpic of subscribers can be attracted to paid streaming. But as soon as that release is leaked to an easily accessible torrent site, or illegally uploaded to YouTube under the gaze of an all too permissive Google, that exclusive competitive advantage is immediately void. And without exclusive content, Tidal is left with a water thin service at twice the price of the market leader.
The Promise and Problems of Exclusive Content
The central point here is that it takes money to make money. To offer exclusives, Tidal is either required to pay a premium for that content up front, or offer a larger chunk of its subscription fees. Its price point of $19.99 per month can make this affordable, as long as the exclusivity of what the platform offers isn’t undercut.
In reality it’s the exclusives and star value that customers will be paying the higher price for. Audio quality can be a factor, as can quality of interface and the way the service connects users, but having music that competitors don’t is what really sells subsciptions. Like Netflix paying a premium to produce popular original like “House of Cards,” it attracts headlines and gives consumers a compelling reason to choose Tidal.
All of this makes exclusive content a loss leader that a new service like this can I’ll afford to lose. When pirate sites make content available to everyone for free (or, let’s be frank, at the cost of a painful user experience and a potentially infected device from malware-laden landing pages), a priceless competitive advantage can quickly become worthless.
In this way we can see how piracy has the same effects as common theft. If the alternative to paying for a legitimate product is a knock-off alternative that costs nothing, with few immediate legal ramifications, it’s clear that the legitimate product faces unfair competition and an uphill battle to a sale. If Tidal can’t convince potential subscribers to turn away from piracy options, and indeed if authorities fail to do enough to curb those unlicensed options, Jay-Z’s vision could prove to be more of King Canute than King of New York.
For the sake of artists of all sizes, let’s hope he can navigate the piracy problem and ride the tide to streaming music success.