WiMP and Tidal may soon welcome aboard a new executive. One who can harness the potential of the growing market that music streaming is.
Jay Z will reportedly pay $56 million for Aspiro, which is slightly more than half the reported $100 million that Deezer paid for Muve Music, (has over 2 million subscribers), and it’s far more than the $14 million that Beats Electronics paid for Mog, which was the muscle essentially, for Beats Music.
WiMP had around 512k subscribers at end of Q3 (before Tidal launched), according to an Aspiro investor presentation. That’s roughly $109 per subscriber – less than one year of revenue at $10 a month – a discount compared to comparable digital subscription services. Netflix now has a $455 enterprise value-to-subscriber ratio. SiriusXM Radio has a $894 EV-to-subscriber ratio. Spotify’s EV-to-subscriber ratio is $667 at a $4 billion valuation, at which it raised money last year, and $957 at the $5.7 billion valuation placed on the company by Manhattan Venture Research. So, $56 milli is not a bad price.
A streaming service can be had by 2 means: buying or building. Buying a top of the line product could be an exorbitant decision. Aside from building a streaming service from scratch, another option would be to buy a less expensive service, and draw from it a larger and more competitive service. For example, Dr. Dre tweaked Jimmy Iovine’s streaming service and brought the Beats by Dr. Dre brand with him.
Equally, Jay Z would complement WiMP and Tidal with the plethora of goodies that he brings to the table, such as the top names in music and sports under Roc Nation Management – and its partners and affiliates. Jay Z would have at his disposal, an area where he could offer exclusive content unavailable at rival streaming outlets and downloading stores. The service could be a win-win for both artist and service.
Of course, everyone is different; the Beats Music blueprint, which although successful, was no overnight success, may not work for Hov. He would be up against Spotify, Deezer, YouTube, Pandora, Beats Music and many others as well. Although music streaming revenue trumped CD sales in 2014, both paid and free subscription streaming services are respectively challenging.
Partnering with WiMP and Tidal could prove to be a daring expense – one that Jay could easily absorb if expense was all it turned out to be. On the other hand, Jay Z could revolutionize the future of music, a risk well worth $56 million.