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Don Passman had been teaching a course on music law at USC for several years when he realized his class notes were the outline of a book. “Because musicians are oriented to their ears,” he says, there was an opportunity to write “an easy-to-read overview of the business for people who don’t like to read.” Think “big print, lots of pictures, analogies, simple language.” When the first edition of All You Need to Know About the Music Business came out in 1991 — the 11th edition arrived this past October — “there was only one book on the music business at the time that was of any consequence,” Passman recalls. “And it was a bit difficult to read.”
Recently, however, music business education appears to be an increasingly hot topic. Thanks to technological advances, the number of aspiring artists releasing songs with little-to-no understanding of the music industry has ballooned. Many of these acts start releasing tracks in their early teens, long before they might get the chance to take a college-level course on the music business, much less master the nuances of copyright law. And they often hire a similarly-inexperienced friend to serve as a “manager,” ensuring that even their closest advisors lack experience in navigating the industry.
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As a result, there is a dire need for quality, accessible music business education. Many of the platforms that allow artists to create, listen to, or distribute music today see educational initiatives as a way to foster loyalty and community — which will in turn help them stand out in the neverending battle for users and attention — and possibly as an additional revenue stream as well.
Some of these educational efforts are in their early stages: Spotify started testing video learning courses in the U.K. in March, for example, while TIDAL has said education will be a cornerstone of its new era as it works to build financial tools for artists. (It was acquired by Block in 2021.)
The company Creative Intell is further along — it has raised money from around the music business and created an animated series to teach young artists the inner workings of the industry, from record deals to publishing. And the platform Bandlab, which allows its 100-million-plus users to create songs on their phones, has been releasing a steady stream of free tutorials and blog posts.
Helping aspiring artists grasp the intricacies of the music industry is “something that we’re investing a lot in,” says Krevin Breuner, Bandlab’s head of artist development and education. “The industry is more complex than ever, and understanding the business from day one is not just an advantage; it’s essential. Bandlab has such a young audience, it’s growing, and we want those artists to feel like they have a partner — somebody they can trust.”
Austen Smart agrees: The DJ, who co-founded the U.K. music-education company PLAYvirtuoso in 2020 with his brother, sees “huge potential in this space.” “I look at it like, there will be one in eight people, at least, learning at home,” he says, and a portion of those will be interested in the music industry.
Creative Intell co-founder Steven Ship divides the music education field into three buckets — how to create music, how to market music and the business of music. While YouTube alone is littered with free videos on the first two topics — not to mention all the Reddit threads, blog posts and TikTok tutorials — finding reliable and accessible information on the third is more challenging. “The business of music is probably the most important; it has to be the most accurate, and it’s often ignored,” Ship says.
If an aspiring artist produces a track poorly or markets it clumsily, that song probably won’t do well — a temporary setback. In contrast, if they don’t understand how the industry works, the consequences can be far more damaging: They could sign a contract with a manager, label, or publisher that cedes control of their output for decades. “Artists were horribly taken advantage of in the early days of the music business, because they just didn’t know what they were doing,” Passman says. And today, “the industry is changing so fast,” Breuner adds, making it even harder to “know what’s important and what’s not.”
When Smart signed a major label deal with his brother — just “two hungry young artists living in London” — he admits the pair “didn’t have the knowledge and the understanding of what we were ultimately signing.” An attorney would have helped, but they didn’t have the cash “to engage with lawyers who could help us interpret it.”
Contracts are often “murky and complicated,” Smart continues. “You get offered a relatively big advance; it’s quite a big number when you’re 25 and 22. What does it actually mean? What does it mean ten years later?”
If he could rewind the clock, he imagines going through the process again — but this time, “we’ve got that course on understanding label deals” available. And if necessary, he could “book a one-on-one session with someone for 30 pounds” to help provide extra context. This is part of the reason that one of PLAYvirtuoso’s “three pillars” of educational material centers on understanding the music industry.
PLAYvirtuoso is one of four companies that partnered with Spotify initially to provide courses on a variety of topics. The streaming service’s decision to test new education materials came about because it saw data indicating that some users were eager to acquire more knowledge.
“If I take you 10 years back, most of the people that came to Spotify came with a single intent: listening to music,” says Mohit Jitani, a product director at Spotify. “But in the last few years, as we brought on podcasts and audiobooks, people started to come to Spotify to listen to an interview or learn leadership and finance.”
Currently Spotify’s courses are offered via a freemium model: Users are able to access the first few lessons for free, but they must pay to complete a full course.
While Spotify’s exploratory foray into education stemmed from the fact that “people started coming to [us] for casual learning,” as Jitani puts it — and it potentially offers the platform another new revenue stream — TIDAL’s recent drive to help artists raise their business IQ is driven in part by its new owner, the payments company Block.
“Building tools and services for business owners, we saw that the moment that you get a little traction outside of your friends and family, the world becomes a lot more complicated,” says Agustina Sacerdote, the TIDAL’s global head of product. “You have to start to understand your numbers to understand where the next big opportunity is going to come from.”
The same principle applies to artists. Understandably, they tend to focus on the art. But as Ship notes, “The moment you release a song, you’re in business” — whether you like it or not. So TIDAL has started offering webinars and rolled out a new product called Circles, which Sacerdote likens to “a very curated version of Reddit, where we have the topics that we believe most artists have questions about,” including touring and merchandise.
For now, TIDAL’s products are free. “Once an artist does get a really good piece of advice that they would have never gotten [elsewhere] on Circles, then we’ll start to think about, how do we monetize?” Sacerdote says.
Creative Intell’s materials on the music business are currently far more comprehensive than TIDAL’s or Spotify’s: The company has created 18 animated courses to help aspiring artists — the vast majority of whom don’t have a manager or lawyer — “understand what they’re signing, learn how to monetize themselves better and learn how to protect themselves,” Ship says.
Creative Intell releases some materials for free and charges for access to everything ($29.99 a month). It’s also aiming to work with distributors like Vydia as marketing partners. Vydia is not the only company looking to provide this type of resource — Songtrust, for example, has built out its own materials to help songwriters understand how to collect their money from around the world.
“Other industries have all kinds of corporate resources for training and the music industry is lacking those,” Ship says. “We’re trying to fill that void.”
TIDAL will combine its HiFi Plus and HiFi tiers as of April 10. The benefits of the pricer HiFi Plus plan will now be available to those on the more affordable HiFi plans; the single tier will be simply dubbed TIDAL. An individual TIDAL plan will cost $10.99 a month. HiFi Plus used to cost […]
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.”
Global head of product Agustina Sacerdote
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?
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.
Artist investors Usher, Rihanna, Nicki Minaj, Madonna, deadmau5, Kanye West, Jay-Z and J. Cole (from left) at the TIDAL launch in New York in 2015.
Jamie McCarthy/Getty Images
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.)
Inside TIDAL’s new Manhattan office.
Julian Walter
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.
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.”
Artist relations lead Jason Kpana
Travis Shinn
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.”
CEO Jesse Dorogusker
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.
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.
A Delaware judge has dismissed a shareholder lawsuit against financial technology company Block Inc. over its 2021 acquisition of majority ownership in Tidal, the music streaming service partly owned by rapper Jay-Z.
A pension fund shareholder alleged that Block founder and CEO Jack Dorsey and the company’s board of directors breached their fiduciary duties in agreeing to pay roughly $300 million to take control of Tidal as it was failing financially and the target of an ongoing criminal investigation.
Chancellor Kathaleen St. Judge McCormick ruled Tuesday that the pension fund had failed to demand that Block’s board pursue legal action itself before filing a derivative lawsuit on behalf of the company. Under Delaware law, shareholders must make such a demand or demonstrate that doing so would be futile because a majority of directors were self-interested, lacked independence or faced a substantial likelihood of liability.
McCormick noted that the demand requirement is a manifestation of Delaware’s business judgment rule, under which courts defer to the decision-making of corporate directors unless there is an indication they acted in bad faith. That deference remains even if a corporate decision turns out to be unwise.
“It seemed, by all accounts, a terrible business decision,” the judge said of Block’s acquisition of Tidal. “Under Delaware law, however, a board comprised of a majority of disinterested and independent directors is free to make a terrible business decision without any meaningful threat of liability, so long as the directors approve the action in good faith.”
Tidal, which presented itself as an artist-friendly alternative to other music streaming services, was formed when a group of recording artists led by Jay-Z, whose real name is Shawn Carter, acquired Norwegian streaming service Aspiro in 2015 for $56 million. Rebranded as Tidal, it struggled to attract subscribers, logging multimillion-dollar losses for 10 consecutive quarters by mid-2020. It also churned through five different CEOs by 2020, when Carter personally extended a $50 million loan to the struggling outfit. Meanwhile, Tidal became the target of a criminal investigation in Norway for artificially inflating its streaming numbers.
Nevertheless, Dorsey, who is also the co-founder and former CEO of Twitter, began thinking of acquiring Tidal after summering with his friend Carter in the Hamptons in 2020, according to court documents. By videoconference from the Hamptons, he raised the issue during a Block board meeting. The directors agreed to form a transaction committee while Dorsey drafted and submitted a nonbinding letter of intent to purchase Tidal for $554.8 million.
A management report to the transaction committee in October 2020 raised several red flags. They included Tidal’s difficulties in attracting subscribers in a market dominated by Spotify, with most of the remaining market share captured by Apple and Amazon. The report also noted the Norwegian criminal probe and a federal lawsuit by performing artists who said Tidal was withholding royalties they were owed. A week later, the committee was presented with another report discussing Tidal’s history of quarterly losses, expiration of artist contracts, and $127 million in accrued liabilities. A slide presentation noted that Dorsey was the only person advocating strongly for the deal, which had received “substantial push back” from Block’s senior executives.
The committee nevertheless instructed management to continue pursuing the deal. In early 2021, after Tidal missed its financial forecasts for 2020 and Block’s management reduced its valuation of Tidal to $350 million, Dorsey proposed buying 88% of the company for $309 million. The deal closed on April 30, with Block paying $237.3 million after adjustments for an 86.23% stake.
“It is reasonably conceivable that Dorsey used corporate coffers to bolster his relationship with Carter,” wrote McCormick. The judge also noted that the defendants conceded that Carter, who joined Block’s board as part of the deal, could not be considered impartial.
McCormick concluded, however, that the plaintiffs had failed to demonstrate bad faith by members of the transaction committee in approving the deal.
“Plaintiff has alleged sufficient facts to make a reasonable person question the business wisdom of the Tidal acquisition, but plaintiff has failed to plead that the committee defendants acted in bad faith and thus faced a substantial likelihood of liability for that decision,” she wrote.
MQA, the audio coding technology company that makes high-resolution streams for companies like Tidal, entered into administration after its founding financial backer stepped down from its board, according to company filings and media reports.
Anton Rupert, grandson of the billionaire South African tobacco tycoon of the same name, was terminated from the position of director of the board of MQA Limited on March 17, according to a filing. Rupert represented Reinet Investments S.C.A., MQA’s founding funder.
The London-based company specializes in making large music files small enough to be compatible on any service or playback device without losing any quality, it says. While it grew its brand presence through partnerships with major music compies like Xiami Music in China, Tidal and the independent music trade group Merlin, it has struggled to make a profit.
The company flagged its uncertain financial future in its most recent annual report, which was for the year ending Dec. 31, 2021. In a statement in the report, MQA chief executive Mike Jbara described the company as a “loss-making start-up” and said it is aware it faces competition for its employees from other U.K.-based technology companies offering certain financial incentives. The company also stated it had secured funding committments to maintain operations only through the first quarter 2023.
MQA’s business was built on driving demand for their tech by providing tools to content creators who would add to the catalog of music made using MQA’s technology. Those MQA files would make their way to consumers ears via distributors and broadcasters that have agreements with MQA.
For listeners, the proof would be in the quality of the stream. The company said it had 132 consumer product agreements as of Dec. 2021.
Last week, technology news website What HiFi? wrote MQA was going into administration, citing a statement from the company. What will happen to the services MQA provides to its partner companies is unclear, but going into adminstration does not always disrupt a companies’ core operations, at least not at first.
Similar to declaring bankruptcy in the U.S., entering into administration in the U.K. protects insolvent company from creditors. This breathing space gives the company time to pull itself out of its financial problems or the court-appointed administrator will advise taking steps — such as selling off assets — to help pay off the company’s debts.
MQA did not respond to a request for comment.
In their last annual report, the company said it is “confident that we will obtain additional funding commitments during those discussions in (the first quarter) 2023.”
Universal Music Group CEO Lucian Grainge announced that the company had entered into a new partnership with Deezer during an earnings call on Thursday (Mar. 2nd). The goal? To help develop a “new model” that “ensure[s] continued growth of streaming” while also valuing “the contribution of both artists and fans alike.” UMG previously touted a similar partnership with TIDAL in January.
The need for a “new model” — also highlighted in Grainge’s letter to staff from January — was a recurring theme of Thursday’s call. “Streaming has evolved in a way that undervalues the critical contributions of many an artist as well as the engagement of many fans,” Grainge said. This unfortunately flouts “the basic unarguable truth that is: The artists are the center of everything in the music ecosystem,” he added.
UMG executives offered scant details about what this new model would look like, even when asked directly about the topic, saying it was too early to tell. One key element for Grainge appears to be that “artists are rewarded for the fans they bring in [to subscribe to streaming services] and the engagement they drive [on those platforms].” In addition, he hoped that fans would be “offered more ways to engage.”
These sentiments were echoed by Michael Nash, UMG’s executive vp and chief digital officer. Streaming platforms can do “a better job of monetizing these high integrity, high intense artist-fan relationships,” he said. “That will come with superfan monetization. We’ve been speaking with platforms…about the enhancement of offers to the consumer that reflect the engagement with artists that are really driving the economic models of the platform.”
UMG executives also praised the streaming services that have raised their prices recently, mentioning Apple and Amazon by name (twice). “Fans recognize the enormous value offered by music subscriptions, still a relatively low cost, high-value form of entertainment, which in turn has supported decisions made by a number of our DSP partners to raise prices recently,” Grainge said.
But not all streaming services have gone this route. Grainge added, pointedly, that “ensuring the artists’ work is properly valued should be a critical goal for everyone who wants to keep the industry growing.”
In addition to discussing the future of streaming, UMG executives spent a notable portion of the conference call explaining to analysts, in defensive tones, their place in a highly competitive catalog acquisition landscape and the strategy they use to evaluate potential purchases. Grainge said UMG sees “almost everything” in the music rights investment space that goes up for sale and passes on “most of it” because it does not meet the company’s standards for returns.
He also asserted that many competitors in the catalog acquisition space are “passive participants who do nothing and therefore cannot exploit the full potential” of the rights they own. “There are many who claim they actively manage rights, but they do not,” Grainge said. “Why? Their lack of infrastructure, their lack of experience and expertise and even more critical, in many cases, their inability to acquire all of the rights necessary to actively manage anything.”
Acquisitions “are an important, although relatively small proportion of our total business today,” UMG’s CFO Boyd Muir added during his remarks. “But we will continue to be opportunistic, to add to a roster of iconic artists, in a financially disciplined way.”
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Source: TIDAL / TIDAL
Elliott Wilson is looking to push the culture further. He has launched a new show on TIDAL exploring a day in the life with rap talent.
As spotted on Hip Hop N More the esteemed journalist has another trick up his sleeve. This week he announced his new THORO show where he links with an MC and spends time with them throughout all of their travels; personally and professionally.
For the launch, the Rap Radar Podcast co-host met up with the East Atlanta, Georgia native in his hometown of Dekalb County. The duo visit his former home of the Paradise East Apartments to see where it all started for the “Hell Shell” rapper. They then head to a nearby Texaco station (where there is currently a mural of Nudy up) then join the rest of his team for lamb chops at a eatery called Cheetah Lounge.
Wilson expressed his enthusiasm regarding the experience in a Tweet. “Welcome to #Thoro I spent a day in the Eastside of Atlanta with @PDE_YOUNGNUDY He is charismatic and hilarious.” he wrote. You can view the preview to the first episode above and hear the full audio on TIDAL here.
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Source: Elliott Wilson / Elliott Wilson
Nowadays Jay-Z is a man of few words. In an exclusive interview with TIDAL’s Elliott Wilson, the Brooklyn mogul discusses his recent Grammy performance and more.
As spotted on Tidal the legendary MC made history at the 65th Annual Grammy Awards show. The ceremony included a tribute honoring Hip-Hop’s 50th anniversary but DJ Khaled pulled off his own memorable moment in the first-ever live performance of his posse cut “God Did”. According to Wilson, he received a surprise text from Jay requesting he show up to Crypto.com Arena for rehearsals. In an exclusive interview Hov spoke with the Rap Radar founder about show and his history with the academy.
When asked why he ultimately decided to perform his four-minute verse he said he did it for the people. “Lenny S. [Roc Nation Senior Vice President Lenny Santiago] got to tell you that one. I thought about it, I was in my head and I just broke down and said, ‘You know, it’s a four-minute verse’. Again, for the culture, for Hip-Hop, we got to do that,” he said.
Jay-Z went on to explain why he needed to take advantage of the special occasion. “It’s not what you expect. And for the culture and for Hip-Hop, we got to do that. We owe that. This thing that changed our lives. We got to do that. A four-minute verse performed at the Grammys. We owe it to the culture, and it ain’t even a burden. It’s a blessing. It’s easy and fun.”
Wilson also got Jay-Z to speak on the elephant in the room regarding his complex history with the Grammys. “The truth is, we grew up wanting to be on the Grammys, and it was our goal. We just want them to get it right. That’s what we want. Obviously it’s music and it’s all subjective, but you got to be in the ballpark. That’s all we want” he added. You can read the interview in its entirety here and watch Rick Ross, John Legend, Jay-Z, DJ Khaled and Lil Wayne perform “God Did” below.
The music business, historically speaking, has not been great at consensus. But there does seem to be growing agreement from many quarters now that the existing payment structure for streaming royalties isn’t working for everyone and that a different approach is required.
This isn’t a new idea, but it’s one that’s quickly gathering steam in the wake of Universal Music Group chairman/CEO Lucian Grainge’s internal staff memo/open letter to the industry earlier this month, in which he called for an “updated model” for the music industry — one that will be “an innovative, ‘artist-centric’ model that values all subscribers and rewards the music they love.”
It wasn’t clear what, exactly, Grainge meant in the letter. And on Tuesday (Jan. 31), it became a little bit clearer that, as of yet, there isn’t much clarity on what it will mean — though UMG is hoping to find it. To that end, Universal has announced a partnership with TIDAL to “research how, by harnessing fan engagement, digital music services and platforms can generate greater commercial value for every type of artist,” according to a press release. Essentially, there are a lot of unknowns here other than that something needs to change.
That was more or less what UMG’s executive vp/chief digital officer Michael Nash said in a statement accompanying the release. “As the digital landscape continues to evolve, it’s become increasingly clear that music streaming’s economic model needs innovation to ensure a vibrant and sustainable future,” he said. “Tidal’s embrace of this transformational opportunity is especially exciting because the music ecosystem can work better — for every type of artist and fan — but only through dedicated, thoughtful collaboration. Built on deeply held, shared principles about the value of artistry and the importance of the artist-fan relationship, this strategic initiative will explore how to enhance and advance the model in keeping with our collective objectives.”
This is not TIDAL’s first attempt at stepping out of the traditional streaming royalties model, in which streaming income is collected and divvied up among rights holders according to their share of total streams. In November 2021, the streamer announced a new three-tier membership structure and a step into a user-centric royalty model for its premium tier, which endeavored to pay rights holders based on the streaming activity of each individual user — with the additional element that 10% of each user’s subscription fee would go directly to their most-streamed artist.
That, in itself, is a twist on the “fan-powered royalties” that SoundCloud first rolled out in March 2021, which allocated streaming revenue to artists based on which acts a given user listened to, and which Warner Music Group opted into last year. (Deezer has also publicly supported a user-centric model.) SoundCloud says that artists using FPR generate 60% more streaming revenue than those who use the more traditional model, though it’s currently only being offered to indie artists and WMG artists on the SoundCloud platform; a MiDiA study said that 56% of artists were better off with FPR. Access to the data on who the fans are who are streaming that music the most, SoundCloud has said, is the true game-changer for the model.
There has, however, been some hesitance around that user-centric idea, mainly due to studies conducted in the last few years surrounding who would benefit, and at the expense of whom, by the switch. One study found that for 99.4% of artists, the switch would equate to less than a 5% bump in royalties — for many, effectively just a few euros per year — which could be offset by the administrative costs of the switch itself for the platform. That could disproportionately affect R&B/hip-hop artists, given that the genres have thrived in the streaming era, to the benefit of other, smaller or more niche genres. And it would definitely take away from top earners’ revenue — i.e., artists who wield an outsized voice in the business. A general view became that the switch would equate to moving money from one bucket to another, without really moving the needle for most artists at all.
TIDAL, in today’s announcement, effectively conceded the point and said they are stepping away from the user-centric model they were pursuing in order to take a step back and join in this new research project with UMG. “We are setting aside our current fan-centered royalties investigation to focus on this opportunity for more impact,” TIDAL’s Jesse Dorogusker said in a statement. “This partnership will enable us to rethink how we can sustainably improve royalties’ distribution for the breadth of artists on our platform.”
What they’re saying is, essentially, it’s time for a new study to see if there are better, perhaps more nuanced, ways to change up a model that pretty much everyone is beginning to agree is no longer functioning the way it was originally intended. “At TIDAL, we learned from [fan-centered royalties] there is an opportunity to build a royalties distribution model that could be better at compensating the breadth of genres and artists that contribute to streaming catalogs,” TIDAL’s global head of communications Sade Ayodele tells Billboard. “Many of the alternative models explored, however well intended that they are, unfortunately create a new set of winners and losers. With this partnership, we’re hoping to find a fairer and more equitable distribution approach that benefits a broader set of genres and artists contributing to the culture of music.”
Which brings us, again, to the original question: What will that look like? The answer could be varied, and it could be different for each streaming service. There have been some conversations in some sectors of the industry about weighting music streams higher than background sounds, for instance, or more heavily weighting intentional listening (searching for or clicking on a song or artist) over background listening (a playlist, or an algorithmically-chosen next song). There are already different models around ad-supported vs. paid subscription payouts, and there is a conversation to be had about how fan engagement should or could influence where money is directed. What UMG and TIDAL are trying to say with Tuesday’s announcement is, let’s go try some things and see what works, and let everyone else know what we’re doing so that maybe they can try to find an innovative answer, too.
Consensus is a hard thing to come by. There likely won’t be a consensus around what the end solution is, and several options could eventually emerge. But streaming has been around for more than a decade now, and if there’s any consensus at all, it’s that something needs to change.
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