The Rewards and Pitfalls of Jay Z’s Aspiro Music Streaming Service

Jay-Z

MzHanaG

All start-ups face challenges. Just ask Jay Z.

Prior to going public with his acquisition of Swedish music streaming service, Aspiro, Mr. Carter had a think-tank session with industry figureheads and key players, including Madonna, Kanye West, Daft Punk, Nikki Minaj, Chris Martin of Coldplay, Jack White, Beyonce, two anonymous country music stars and roughly 20 other music executives and attorneys, during Grammy week this past February.

The purpose of the meeting was to share perspectives on how Mr. Carter could mold the streaming network into something like the old United Artists film studio, in which the artists had more hands-on involvement in the business, and would be able to reap more benefits than that of the current, more corporate-run platforms.

Carter’s company, Project Panther Bidco Ltd, purchased Aspiro on March 13th. The company, which owns the WiMP and TIDAL streaming networks, is one of few services currently available to provide CD quality streaming. The small network (of roughly 512,000 paying subscribers) has about 20,000 subscribed to the high-def tier. When it relaunches, the network will be renamed TIDALHiFi.

Paying only about $56 million for a service, which already has infrastructure and subscribers is a steal when you line it up side by side with the estimated $300 million that Apple paid for Beats Music, as part of last year’s $3 billion Beats acquisition. But there’s plenty of hurdles to get over with services like Pandora and Spotify in the lead, not to mention industry giants like Apple, which has enlisted the industry-leading Beats Music infrastructure. Don’t forget Google (with its YouTube Music Key) set to launch later this year.

It’s fascinating that even though most artists are dissatisfied with the royalty rates that services like Spotify has to offer, and even with it being a small line of business, it still yields 70% of the profits to it’s rightful owners. These streaming services aren’t suffering profit-wise, unlike Aspiro, which lost $5 million in its last three months. The fact remains that record labels are eating most of the profits earned.

That said, most of the attendees at the meeting (save Mondonna, who’s currently unsigned) are signed to Universal Music  with links to former Universal boss Jimmy Iovine and Dr. Dre (both former bosses at Beats and now Apple Executives). It’s a valid question to raise, then, of how many of the attendees would subscribe to something new, and potentially put themselves in a position that goes against the tried and true – and more prevailing competitor, such as Apple Beats Music.

The upside to Mr. Carter’s purchase of Aspiro, is that the company is already licensed in the U.S., Canada, and many European countries, so the acquisition does come with its perks. As well, TIDAL offers more than 75,000 high-definition videos, which is unlike other audio-only networks, at least until the arrival of YouTube Music Key. So there are some advantageous cards that Aspiro can play.

It isn’t clear why Jay Z acquired Aspiro, which let’s face it, has it’s challenges. One potential reason could be that he was trying to keep up with the Joneses. The ever-ambitious Mr. Carter may not have wanted to fall behind people like Dr. Dre, for example.

His competitors could easily eclipse Mr. Carter’s launch with the upper hand of their history in the music streaming industry, and their deep pockets.

History has proven that consumers are not all-too persuaded by high-quality audio, so TIDALHiFI may also face some challenges

Only time will tell.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s