Fintech company Square has bought a majority stake in Tidal and people can’t stop asking why – and whether it’s got something to do with crypto.
At first glance, the question marks surrounding Square’s decision to buy the music-streaming platform seem justified. Tidal is spearheaded by music icon Shawn “Jay-Z” Carter but it has so far failed to make a significant dent in the profits of competitors like Spotify, Apple Music and Amazon Music. This has led to raised eyebrows about the payment service provider’s acquisition choice.
Recognising these concerns, the first thing Square’s founder and CEO Jack Dorsey did was to address them via Twitter, which he is also the co-founder and CEO of.
“Square is acquiring a majority ownership stake in Tidal through a new joint venture, with the original artists becoming the second largest group of shareholders, and Jay-Z joining the Square board,” he tweeted. “Why would a music streaming company and a financial services company join forces?!
“It comes down to a simple idea: finding new ways for artists to support their work. New ideas are found at the intersections, and we believe there’s a compelling one between music and the economy. Making the economy work for artists is similar to what Square has done for sellers.”
Referencing Tidal’s vision of “honouring artists by being artist-owned and led”, Dorsey argued that the deal would enable artists to tap into success similar to that experienced across Square’s other verticals.
“Given what Square has been able to do for sellers of all sizes and individuals through Cash App, we believe we can now work for artists to see the same success for them, and us,” Dorsey said. “We’re going to start small and focus on the most critical needs of artists and growing their fanbases.
“Square created ecosystems of tools for sellers and individuals, and we’ll do the same for artists. We’ll work on entirely new listening experiences to bring fans closer together, simple integrations for merch sales, modern collaboration tools, and new complementary revenue streams.”
Square’s head honcho said he was “grateful for Jay’s vision, wisdom, and leadership”, adding that he was “inspired” to have the 99 Problems singer on the Square board.
Square expects to pay a mix of cash and stock of $297m for a significant majority ownership stake in Tidal. The deal is expected to close in the second quarter of 2021 and is subject to regulatory approval.
“I said from the beginning that Tidal was about more than just streaming music, and six years later, it has remained a platform that supports artists at every point in their careers,” said Jay-Z. “Artists deserve better tools to assist them in their creative journey. Jack and I have had many discussions about Tidal’s endless possibilities that have made me even more inspired about its future. This shared vision makes me even more excited to join the Square board. This partnership will be a game-changer for many.”
A move into non-fungible tokens?
Dorsey’s explanation didn’t prevent armchair Twitter pundits accusing him of virtue signalling or of mixing his personal interests with business. However, others noted that the synergies between the two companies may not be that far-fetched.
Some pointed out that this wasn’t the first project that Dorsey and Jay-Z had collaborated on. Back in February, they announced a joint 500 bitcoin investment to fuel the development of cryptocurrency companies.
The argument is that this previous team-up, the new Square-Tidal deal plus Square’s existing cryptocurrency revenue stream business (via its Cash App) indicate that the pair might adopt the use of non-fungible tokens (NFT).
Dorsey specifically said that the companies would look for “new ways for artists to support their work.” NFTs could be a way for them to do just that.
Simply put, NFTs empower artists to sell digital media directly at higher prices, as well as collecting a cut from secondary sales.
As Forbes noted, there are nearly $50m worth of NFTs trading hands every week. And this segment of the industry could be about to become even more popular. This Friday, rock band Kings of Leon is set to release its new album When You See Yourself as an NFT, making it the first band to do so.
The question is if Square would be able to create enough demand for NFTs to become mainstream, which would make the deal with Tidal more palpable to some.
While the jury is out on that, it is clear that having Jay-Z and the other celebrities on Tidal as brand ambassadors for Square could provide a big boost from a promotional perspective.