Jack Dorsey’s Square is acquiring a big stake in Jay-Z’s Tidal
It’s weird—but it makes sense.
Here’s what I’m talking about: Square, the payments company founded by Twitter CEO Jack Dorsey, will acquire a majority stake in Tidal, the audio streaming service founded by musician Jay-Z, for about $297 million in cash and stock, the companies announced early Thursday.
Tidal will remain a separate part of Square, while Jay-Z will join Square’s board. Existing artist shareholders in the Tidal business will remain stakeholders.
At first glance, it may seem a little bizarre: Square is a fintech that just launched its own bank while Tidal is a subscription-based streaming service focused on high-quality audio. The so-called synergies aren’t immediately obvious.
But everything is fintech now. And many investors are seeing an opportunity in companies that service the so-called creator economy, a class of individuals including artists, singers, and influencers that are trying to cut out expensive middlemen and brokers, effectively going it alone. It’s not just about the YouTube or TikTok creators: Prominent musicians such as Taylor Swift have been very public about their criticisms of music labels holding ownership of their works. The discontent has led to the creation of startups such as Stem, a nascent company that offers financing to musicians without taking ownership of their songs.
While Square was scant on the exact details of what fintech services it could offer musicians, executives pointed to the similarities between the needs of small businesses and artists—for example, selling tickets, per Tidal’s interim head Jesse Dorogusker, a longtime Square executive, to Bloomberg.
“It comes down to one simple idea: finding new ways for artists to support their work,”Jack Dorsey, cofounder and CEO of Square, said in a statement.
So in theory, the tie-up makes sense. But execution will be a different story. And Tidal itself has not cruised on the calmest of waters in the past: It’s lagged behind in the brutal streaming wars between players including Apple, Amazon, and Spotify. Norweigian authorities have also opened an investigation into allegedly false streaming numbers on the platform.
Given that, maybe it’s no surprise that this was the answer Dorogusker had for Billboard when asked about the streaming service: “We think the streaming service is an important part of it, and it is growing and will continue to grow. We love that and we intend to continue to invest in that business, but we’re especially interested in creating new adjacent opportunities in service of the whole artist experience and their experience with their fans in addition to the streaming service.”
So yes, Tidal’s streaming continues—but the intention behind the deal is to really focus on creating new services for artists, not just for the big-name headliners, but also for emerging names.
The deal marks a busy start to 2021 for Jay-Z, who is friends with Jack Dorsey. The duo partnered on a bitcoin endowment in February. A few weeks back, the rapper also sold 50% of his champagne business, Armand de Brignac, to luxury conglomerate LVMH. While the terms of that particular deal was not disclosed, the numbers of the Tidal tie-up are more clear: Jay-Z acquired the music-streaming service in 2015 for about $56 million along with other artists.
MEGA DEAL ALERT 🚨: San Francisco-based Identity management company Okta announced plans to acquire another business in the space, Auth0, for $6.5 billion. It’s a massive bet: The valuation of the stock transaction represents nearly 22% of Okta’s valuation. While an IPO was an option for Auth0, says board member and Partner at Bessemer Venture Partners David Cowan, the duo ultimately decided the companies were better off together.
While both focus on identity management (think the numerous login pages for your company and apps), Okta focuses on managing authentication for third-party software (think Concur or Salesforce), while Auth0 focuses on software and applications written within an organization itself, Cowan explained.
Bessemer, which plans to hold onto Okta stock per Cowan, has invested a total of $93.7 million in Auth0 since the company’s seed round. That stake is now worth over $1 billion.
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