TIDAL Plots a New Course — Will It Pay Off?

On Aug. 10, the day before the 50th anniversary of DJ Kool Herc’s 1973 Bronx block party — considered the official birth of hip-hop — TIDAL hosted its first public event at its new high-rise offices near Manhattan’s Union Square. As part of the festivities, music consultant and writer ladidai conducted a panel featuring three artists at three different points in their careers: veteran Yonkers MC Styles P from The LOX, which headlined shows in Queens and The Bronx as part of the anniversary celebration; critically acclaimed Alabama rapper Flo Milli, who the following night would make a surprise appearance at the star-studded Hip-Hop 50 Live concert at Yankee Stadium; and rising Roc Nation signee Reuben Vincent, a North Carolina rapper. The panel focused on advice for developing artists about navigating the music industry and building career longevity.

“Artists have to look at themselves as entrepreneurs,” Styles told the crowd. Now in his third decade as a performer, he also owns a series of health-focused juice bars in New York. “If you think about the most successful people in hip-hop, they all have their hands in a few different pots. That’s just the way of the hustler.”

For TIDAL, events like these are a key component of a new strategy that, it hopes, will foster its own longevity. They are part of its revamped Rising program, which grew out of conversations with more than 100 artists and provides tools for creators that can streamline their business dealings so they can focus more on their art. This strategic focus on economic empowerment for artists derives from TIDAL’s new corporate owner, Block, the mobile payments company led by Twitter co-founder Jack Dorsey that was known as Square when it acquired the streaming platform in March 2021 for an initially announced $297 million — more than five times the $56 million that Jay-Z paid to acquire it in 2015.

Block changed the way small businesses operate through its Square credit card reader, Cash App, and financial service offerings that cater to small-business owners and entrepreneurs overlooked by major credit card companies. The services and solutions it offers have helped it achieve a market cap of $39.6 billion at press time.

Not surprisingly, TIDAL’s new owner sees independent artists in the same vein: self-funded, slim-margin businesses that lack the tools needed to succeed in their line of work.

The financial services that TIDAL intends to offer will begin rolling out in 2024, and when they do, TIDAL plans to introduce a pricing structure that, if it attracts enough artists, will create an income stream that is not dependent on streaming subscriptions. “If we help creators manage and grow their businesses, so will we,” a representative says.

More than ever, artists in the music business are piecing together a living through streams, merchandising, live shows, social media ads and synch placements — supplemented with side gigs and temp jobs — as the old world of big advances and steady album sales becomes a distant memory and the odds of standing out in a torrent of new music grow slimmer.

Every day, over 120,000 audio tracks are uploaded to streaming services, according to Luminate — a figure that has nearly tripled in the past five years — making it harder for artists to break through and build a fan base, much less earn and manage their money. It’s a disparate, complicated and often confusing business, especially for up-and-coming artists trying to get by without the support of a traditional label or the institutional know-how of an experienced management team.

“The vast majority of artists on a streaming platform cannot afford to live off their music, even though that’s the No. 1 goal for them,” TIDAL global head of product Agustina Sacerdote says. “It’s not to be famous, it’s not to have an entourage of 20 people. It’s just to be able to quit their side jobs.”

Those artists who have established a foothold “are cobbling together ways of handling payroll and invoices, paying their quarterly taxes and understanding what’s a write-off and what isn’t. That’s part of being a small-business owner,” says Matt Graham, managing partner for talent management company Range Media Partners. He adds that when a young artist does break through, “a lot of money comes fast, and without the appropriate mechanisms to allocate things properly and pay people on time, you can run into tax issues with the government; you can run into lawsuits with collaborators — it’s a really tricky business to navigate.”

That’s exacerbated by a lack of financial management resources for emerging artists, in part because there isn’t much money in it for those with the know-how to help. Many business managers, for example, won’t take on clients who bring in less than $500,000 a year.

TIDAL’s Rising program operates with these hurdles in mind and is “anchored around three pillars: educate, amplify and connect,” says Alex Mas, the platform’s marketing director and one of the first five employees hired after the company’s 2015 U.S. relaunch. That includes offering artists resources, webinars and workshops on, for instance, balancing release and tour budgets, the mechanics of synch licensing and marketing, and understanding how paid media such as Facebook directly relates to streaming numbers and ticket sales.

TIDAL’s artist relations team also works to connect emerging acts with label executives, potential managers, lawyers and booking agents, among other industry facilitators. “It’s helping artists become more self-sufficient so they can go off and succeed regardless of the platform,” Mas says.

Given TIDAL’s modest subscriber numbers — some 2.1 million subscribers globally as of mid-2020, according to a lawsuit filed the following year, compared with Spotify’s approximately 138 million, a number that has since grown to 220 million — the company’s CEO, Jesse Dorogusker, who has spent over a decade at Block and was instrumental in the development of the Square card reader, says the platform’s support of artists must extend beyond monetizing the streams that artists generate on its platform. The representative says TIDAL does not disclose subscriber numbers, but adds that “streaming will continue to have value” for its new owner. “We’re a music platform and remain excited by the opportunity to evolve our streaming services.”

“Even if we were one of the bigger services, just making [an artist’s] experience better on TIDAL is not enough,” says Dorogusker, a Liz Phair superfan and Silicon Valley veteran who, before joining Block, spent eight years developing iOS accessories for Apple. “You have to know all of your revenue, your data, your collaborators, your access to capital, all of your taxes — it can’t be platform-captive,” he explains. “How could you hope for artists to be fortunate enough to work solely on their art if they have no access to this information?”

This is decidedly new territory for TIDAL, which is still, in the minds of most consumers, associated with Jay-Z, a claim to superior audio quality and a creator-first ethos. (It was notably the first streaming service to introduce full writer credits for tracks and the ability to search by producer.) And though sources tell Billboard that the Roc Nation owner has been just as, if not more, involved in TIDAL’s business since the sale — “I would say his spirit is felt,” senior vp of artist and label relations Jason Kpana says — the company’s messaging must pivot as it changes course. Dozens of industry figures, managers and artists Billboard contacted for their thoughts on TIDAL 2.0 all said they were unaware of its new business strategy. Now, as the company attempts to transform itself from a consumer-centric to artist-focused platform, will anyone be listening?

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TIDAL debuted in May 2015 at a star-studded and controversial press conference at the James A. Farley Post Office in Midtown Manhattan. Jay-Z had purchased Scandinavian streaming service Aspiro and brought together 15 of his celebrity-artist friends — including his wife, Beyoncé; Kanye West; Madonna; Jason Aldean; Alicia Keys; Arcade Fire; Coldplay’s Chris Martin; Rihanna; and deadmau5 (replete with his bulbous rodent helmet) — to announce what Keys called “the first-ever artist-owned global music and entertainment platform.” Each of the artist-owners were given a 3% share in the company, and TIDAL began implementing a plan that leaned on exclusive album releases, video premieres and high-quality audio to draw in subscribers who were, by then, used to getting music for free.

Thus began a strategy aimed at disrupting what was quickly becoming the status quo for the music business. TIDAL’s 16 artist-owners were protesting the low royalty rates of ad-supported streaming services like then-burgeoning Spotify that paid fractions of a penny per stream and vowed to use their collective power to boost royalties for all. Their stated mission was interpreted by some as noble and others as a scheme by some of music’s 1 percenters to line their already brimming pockets.

Ultimately, giant conglomerates Apple, Google and Amazon entered the streaming space and, alongside Spotify, swallowed up market share, edging TIDAL increasingly toward the margins. Yet the staffers who worked in editorial, marketing and industry relations there carved out a niche that focused on rising artists and independent creators, highlighting their stories and creating video content, playlists and podcasts around their work. “It has absolutely always been a part of the fabric of the company to allow emerging artists to find a way to grow in their journey,” says Kpana, who has worked there since 2015.

It was a business philosophy that aligned with Block’s vision, and executives there say it was a reason they acquired the streaming platform. But the purchase wasn’t without friction. Block closed the deal on April 30, 2021, acquiring 86.8% of TIDAL for $223.1 million in cash and $10.1 million in stock. Shortly thereafter, the City of Coral Springs Police Officers’ Pension Plan (a Block shareholder) filed a lawsuit that challenged the acquisition. The complaint alleged that Block CEO Dorsey and the company’s board of directors had breached their fiduciary duties by acquiring a company that they alleged was failing financially.

The lawsuit laid bare some of TIDAL’s financial issues, including multimillion-dollar losses for 10 straight quarters; some $127 million in liabilities, largely in the form of unpaid streaming fees to record labels; and a $50 million loan that Jay-Z extended the company in 2020. Several of TIDAL’s licensing deals with labels and relationships with artists had expired or were not legally enforceable. Sources also told Billboard that the streaming service had been chronically late on royalty payments to labels, a situation Dorogusker says has been remedied. The complaint also contained a morsel of insider business gossip, alleging that the deal was first hatched while Dorsey was vacationing with Jay-Z in the Hamptons and later in Hawaii.

The lawsuit was dismissed in May, albeit with Delaware Court of Chancery Judge Kathaleen St. J. McCormick writing in her memorandum opinion that Block buying TIDAL was, “by all accounts, a terrible business decision.”

With that hurdle cleared, Jay-Z joined Block’s board of directors, and along with several of the original artist-owners, retained a small stake in TIDAL. (Each of those artist-owners either declined to comment or did not respond to requests for comment, and a representative for Jay-Z did not comment.)

McCormick’s assessment of the Block-TIDAL deal had merit. According to Goldman Sachs’ June 2023 Music in the Air report, the top six streaming services globally — Spotify, Apple Music, YouTube Music, Amazon Music, Tencent Music and NetEase — accounted for 92.2% of the global streaming market, and by 2030, that number is predicted to climb to around 94%. And yet, the music streaming business model has yet to produce many profits for anyone, even a company as big and as synonymous with the space as Spotify, which reported a 2022 annual operating loss of 659 million euros (around $720 million) and recently slashed 17% of its work force, or some 1,500 jobs, in the pursuit of profits. (This week, Block also forced austerity measures on TIDAL, laying off some 40 people in an attempt to “right-size our team,” a spokesperson said.) Apple Music and Amazon Music are loss leaders for corporate behemoths with other profit-generators, Deezer is unprofitable, and SoundCloud shifted to distribution and other artist services in an attempt to capitalize on the troves of data it has collected through its streaming service, while also imposing layoffs in May.

Block’s plans for TIDAL, then, could not rely on a pure streaming play, and in a March 4, 2021, Twitter thread, Dorsey revealed his strategy. He wrote that the TIDAL deal was about making the economy “work for artists, similar to what Square has done for sellers.” He added, “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.”

The deal perplexed industry observers. “If Square wants to create new ways to help musicians sell real goods and digital goods, it could just do that,” Vox tech writer Peter Kafka wrote at the time. “Instead, Square is paying [what was then reported] $300 million for a failed music service that doesn’t help it accomplish any of those goals.”

Nearly three years later, several music industry insiders echo Kafka’s point. Dorogusker’s response: “There are very few companies on the planet that have the rights to offer 100 million songs to music subscribers” and produces a valuable trove of data. Under his leadership, TIDAL plans to use that data, and the access it provides to artists and their teams, to create tools of economic empowerment that don’t readily exist in the music business.

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In June, TIDAL unveiled its Artist Home portal, which lets users add their social media accounts to their artist pages, connect with TIDAL employees for support, allow members of their teams to access their profiles and generally manage their look on the platform. It’s essentially a stripped-down version of Spotify for Artists or any of the back-end profile portals that digital service providers currently offer creators. It was a modest move compared with its streaming rivals, but leadership contends an important step forward.

“It is the first concrete milestone toward our vision of establishing a direct relationship with artists and building products and services for them,” Sacerdote says. “We have been in the music business for a very long time, but we have never built specifically for an artist or even dealt directly with an artist.”

TIDAL has always had relationships with the artist community through its artist-owners, exclusives that were intended to build market momentum — interviews, artist-curated playlists, podcasts, and album rollouts for superstars like West, Prince, Rihanna, Beyoncé and Jay-Z — and live events like its annual TIDAL X concert series in Brooklyn and activations at Roc Nation’s Made in America Festival in Philadelphia. But those initiatives were largely designed to pull in fans. Artist Home is the first time TIDAL has worked with artists to build a toolkit on its platform for artists.

TIDAL Rising, which has run in various iterations since the service’s birth, was initially similar to programs like Apple’s Up Next, YouTube’s Foundry and Spotify’s RADAR. But last May, it was overhauled to dovetail with the platform’s artist-empowerment focus. Initially, some two dozen creators were chosen to enroll in the program, which provides resources like webinars and workshops on budgeting money for tours and rollouts, platforms like artist showcases and traditional marketing, instructionals on effective digital marketing and industry connections that would otherwise be out of reach. But crucially, artists in the program are also eligible to receive anywhere between $500 and $50,000 in direct funding, no strings attached.

“We are sitting down with these artists and figuring out where they are in their career, but we’re not defining what funding they get based on what they have coming up,” says Kpana, the artist relations lead. “Mostly, we’re looking at them to see where we think we can be of most assistance, and that’s how we’re deciding what we give them. We’re not deciding what they do with the money.”

Billboard spoke to nearly all of the initial two dozen artists and their teams in the Rising program, and though TIDAL executives declined to get into the specifics of who qualifies for inclusion and funding, a number said they were invited after previously building relationships with the TIDAL team through playlisting or editorial. All said the money they received gave them more control over their careers.

This past summer, for example, Nashville-based singer-songwriter Gabe Lee got the chance to open for more seasoned folk artist Pony Bradshaw on four sold-out dates in Texas during a mid-August weekend; at the end of the trek, his take was $1,200, minus hotel stays (when he wasn’t able to crash with friends) and fuel costs. “In the end, Gabe probably lost money on that trip; it’s expensive to be on the road,” says Torrez Music Group’s Alex Torrez, who manages Lee and signed him to his record label. The grant from TIDAL narrowed those losses while expanding his audience by having him perform for more than 2,000 people across the four shows.

For folk-punk artist Sunny War, who used to tour solo but required a full band to perform her latest record live, the money she received enabled her to pay for extra musicians, which allowed her to play bigger shows, and to buy proper road cases for her gear when she travels. Latin pop/hip-hop artist Angie Rose used her funds to buy new studio equipment (a laptop, microphones and software) she can use to record music on her own. For Nigerian American rapper-producer Akinyemi, the money went toward mixing and mastering costs, as well as marketing materials for his next release. Vincent — who participated in the panel at TIDAL’s Hip-Hop 50 event — was able to pay a video crew to shoot his performance at J. Cole’s Dreamville festival; he used the content to promote an upcoming release. For a handful of other artists, the money went straight to recording costs; for half a dozen more, it covered rent and daily expenses.

The music business has traditionally worked through advances, which must ultimately be recouped. TIDAL’s monetary distributions are more like grants. “This feels more like a social-good project,” says Alex Rosen, head of U.S. streaming at Partisan Records, whose group Geese is in the program. “I think it’s an empowering program. It’s really refreshing to not see any true expectations on funding, and it gives a band that is starting to break out a lot of freedom to help make their art.”

TIDAL sees it as a research opportunity. “At a basic level, it’s just a better use of marketing dollars,” Dorogusker explains. “We could talk about how great TIDAL is, or we could invest in artists and let them talk about how great being a Rising artist is. It’s marketing and communications, and the learning we get out of it is incredibly valuable.”

It also aligns with the emerging view of the business from the perspective of young artists, who in many cases are loath to sign away ownership of their masters in a label deal when there are other potential pathways to success. “We really value equity and ownership, so the core mission for the [TIDAL Rising] program really aligns with how we want to move forward with our artists on both the label and management side,” says Celena Fields, vp of marketing at indie music company LVRN, whose artist, singer-songwriter-producer Alex Vaughn, is in the program. “They’re holding our hand every step of the way, and instilling these resources that are super critical in an artist’s career, especially early on. It’s not just giving you the money, but really providing that educational aspect as well.” Up-and-coming managers, who are beginning to learn the ropes, benefit from the educational aspects, too.

TIDAL says it has hundreds of artists signed up for Artist Home, has grown its Rising program to 106 artists and has distributed grants totaling $830,000. It recently rolled out its Collabs feature — making it easier for creators to work with others through the platform — and held an artist summit in October with musicians from the United States and Poland that focused on career planning, financial well-being and the basics of music law and touring. The services are free for now, and the representative says that a timetable has not been set for when TIDAL will begin charging for its services.

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While TIDAL’s financial support for new artists may be the sexiest part of its new business strategy, helping demystify the business is just as crucial. “The education component is humongous,” says Nicholas Judd, co-founder and CEO of music-focused business management and financial services firm LeftBrain, about the biggest obstacles young artists face. He explains that “having a more informed client start with us, where they’ve been very active in learning about and managing their own finances, means that we can have higher-level conversations and provide even more value because we’re not getting them from zero to one; we’re getting them from one to 10.”

To that point, in October, Block purchased Hi-Fi, a financial services startup that tracks artist royalty income from a variety of different sources — publishing, streaming, performance rights, distribution — in one place. Hi-Fi came the closest, Dorogusker says, to the business model the new owners are in the process of creating. He adds the acquisition is still in the “early days” of being incorporated into TIDAL’s structure, but that it will go a long way toward helping “to build products that help artists manage their money.”

If TIDAL becomes a destination for independent artists looking to optimize and grow their businesses, the expectation is that the company’s future will no longer depend on the financially difficult business of running a streaming service. Businesses that employ Cash App pay processing fees of just under 3% per transaction, and TIDAL will eventually create a pricing structure for the services it will offer. The company says that pricing will vary, with some services being monetized and others incorporated into Artist Home for free. “There’s no one size fits all,” a spokesman says. “How we set pricing is informed by many variables.”

Whether TIDAL’s turn toward artists will resonate remains to be determined, but insiders say there is a new sense of purpose at the company.

“Two years ago, when we bought a music streaming service, we told a story about building scalable self-serve tools for software and financial services to make emerging artists successful, but we didn’t have it yet. It was philosophical,” Dorogusker says. “Now we’re into the tangible. One of the fundamental flaws of the music business is that you mortgage your whole future for that first opportunity. And not everything has to be that way. You can have access to your data. You can have a way to project how many T-shirts you should print for a tour. We thought we could pull a lot of that knowledge in and turn that into tools for artists. But it’s going to be in the act of showing it, not just telling it. This is the start of that.”

This story will appear in the Dec. 9, 2023, issue of Billboard.

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