Technological and Consumer Shifts in the Music Industry

By Butz, Nikolaus T.; Stifel, Florian et al. | Journal of Case Studies, May 1, 2017 | Go to article overview

Technological and Consumer Shifts in the Music Industry


Butz, Nikolaus T., Stifel, Florian, Schultz, Patrick L., O'Neill, Patrick B., Journal of Case Studies


This case was prepared by the authors and is intended to be used as a basis for class discussion. The views represented here are those of the authors and do not necessarily reflect the views of the Society for Case Research. The views are based on professional judgment. Copyright [c] 2017 by the Society for Case Research and the authors. No part of this work may be reproduced or used in any form or by any means without the written permission of the Society for Case Research.

Introduction

The music industry has long been a symbol of the damaging potential of the Internet. The rise of digital music caused widespread changes in the industry, radically transforming the primary means to record, distribute, store, and play music. Relationships among artists, record companies, and consumers changed as well. Even with the increase in internet music distribution channels, profits remained elusive. "The model is still broken." industry analysts bemoaned (Satariano & Shaw, 2017). Numerous independent music streaming services were launched only to fail shortly after. Ignoring the dismal track record, rapper and businessman Jay Z decided to test a new approach by reimagining Tidal, a music streaming service with 500,000 subscribers (Sisario, 2015b). Considering the complex forces driving the streaming music industry, however, Tidal faced a difficult challenge positioning itself.

Jay Z acquired Tidal from the Swedish company Aspiro Group in March, 2015, and promptly turned to his friends in the music business to support it. Leading artists like Beyonce, Kanye West, Rihanna, Nicki Minaj, Madonna, Daft Punk, and others helped announce the launch of Jay Z's newly reimagined Tidal service. In some ways, the service stayed the same as before, featuring paid subscriptions for content and better audio quality. However, Jay Z also sought to give the service a new mission and create a movement around a new approach to the streaming business. Jay Z and his partners focused on the payment model for artists who provide the music for streaming services. Branded as "the first ever artist-owned global music and entertainment platform" (Jurgensen, 2015), Tidal paid a higher royalty rate to rights holders than rival services. All music services pay a royalty rate, but Tidal espoused a self-proclaimed artist-first payout structure. The precise royalty rate; however, was not specified (Sisario, 2015b). This followed a larger concern in the industry over the economic viability and the fairness to content creators in a business built on largely offering music for free to attract a small group of paying customers (Sisario, 2015b).

Jay Z offer the following account of how he saw Tidal addressing these industry concerns:

We saw the movement and how everything was going and figured that this
could possibly be the last music format that we see in this lifetime.
We didn't like the direction music was going and thought maybe we could
get in and strike an honest blow and if, you know, the very least we
did was make people wake up and try to improve the free vs. paid
system, and promote fair trade, then it would be a win for us anyway
(Gervino, 2015).

The launch of Tidal was really a relaunch of the service. Aspiro Group initially created the Tidal streaming music service, and launched it in the US and UK in October, 2014. Tidal had a reputation as a service for audiophiles, and the company had developed partnerships with audio electronics companies such as Denon and Harman to support the service in their products. To support customers who appreciated better sound, the service featured music streaming at a much higher quality level than competing services. Unlike rivals, Tidal did not offer a free streaming option; subscribers paid $20 per month to access its CD-quality streams (Waniata, 2014).

The Music Industry

Industry Performance

Overall Industry Performance

The music industry has been marked by frequent change. …

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