Tidal Launch Event NYC #TIDALforALL
Deadmau5 and Kanye West during happier times at the launch of the Tidal music streaming service. Photograph by Kevin Mazur — Getty Images

Another Door Closes for Tidal as Apple Says It’s Not Interested

Sep 15, 2016

Rumors have swirled for the past few months that Apple was in talks to acquire Tidal Music, the streaming service co-founded by rapper Jay Z and several other high-profile artists. That might have appealed to some of Tidal's members, but a senior Apple executive says it's not true.

"We’re really running our own race," Jimmy Iovine, who runs the Apple Music unit, told BuzzFeed in a recent interview. "We’re not looking to acquire any streaming services."

The Apple executive didn't come right out and deny that talks had occurred, but he made it clear that none are currently in the works.

In June, the Wall Street Journal reported that Apple was in discussions with Tidal about a deal. The consumer electronics giant was said to be especially interested in the stable of artists that Tidal has been able to sign up with its "artist-friendly" approach.

Although there were reports that Apple had lost interest shortly after those talks, not everyone was willing to give up hope. In July, rapper Kanye West told Apple to "give Jay his check."

https://twitter.com/kanyewest/status/759449038097747968

The feature that likely attracted Apple the most about Tidal was the exclusives it has been able to get thanks to Jay Z's involvement. Kanye West, Beyoncé (who is married to Jay Z), Rihanna, and other popular artists have dropped new albums or tracks on Tidal before they were released anywhere else.

Apple has been signing up subscribers to its music service at a fairly rapid pace, and now has about 17 million, but the addition of Tidal's stable would have given it a boost.

Those exclusives may have helped Tidal generate buzz, and have probably helped with sign-ups (the company says it has about 4 million paying subscribers). But it's not clear whether they are actually helping the company financially, especially given the nature of the streaming industry.

According to a legal filing in Sweden, where the original Tidal service was founded, Tidal's parent company Aspiro AB — which Jay Z and his partners acquired last year for $56 million —posted a loss in 2015 of about $28 million, on revenues of $47 million.

The biggest problem for Tidal — and for every other streaming service, including industry leaders like Spotify and Napster — is that the company has to pay so much money to record labels and rights holders for a license to stream their hits that it's almost impossible to make any money.

Spotify pays more than 80% of its revenue to record labels for streaming rights, and according to a Wall Street Journal analysis of Tidal's recent filing, it pays about 75% of its revenue to labels.

The financial pressure created by those payments — many of which require streaming services to pay a fixed amount regardless of how many times a song is played — has driven more than one music service out of business. Rdio went bankrupt and was later bought by Pandora.

Pandora, which at one point was rumored to be looking for an acquisition as well, just launched a reworked version of its $5-a-month service, with new features that it hopes will allow it to grow its subscriber base. But it was forced to give in to the major record labels to get them on board.

Deezer, a European streaming service, had to postpone its initial public offering and take on debt in order to survive, and even Spotify has had to borrow money as it waits to go public.

Apple seems to be the only company involved in the music business that actually has deep enough pockets to make the business work, regardless of what payments record labels want. But if it doesn't want Tidal, it's not clear who would — unless Napster (formerly Rhapsody) wanted to try for a Hail Mary pass to boost the service's chances of survival.

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