By CultureBanx Team
- Square acquires Tidal for $297M for a bigger stake in the music biz
- Tidal was valued at $600 million back in 2017
Jay Z may have “99 Problems” but Tidal is no longer one of them thanks to Square’s $297 million acquisition. Square (SQ -0.90%) is looking to diversify its portfolio by taking advantage of Tidal’s existing cultural fanbase, and of course its Cash App platform has risen to success thanks to hip hop influencers. The company has the capital to spend, with Square reporting $3 billion in revenues in Q3 2020 along with $794 million in gross profits. Tidal’s most recent reports from 2018 showed a loss of $37 million, but perhaps there’s something bigger at play here for music streaming and artists rights?
Why This Matters: First off, Tidal hasn’t taken off the way some would have imagined, but its existence is a cultural milestone when it comes to Black entrepreneurship that can’t be denied. After acquiring the company in 2015 for $56 million, Tidal was valued at $600 million just two years later. While larger platforms like Spotify remain in the lead with massive sales, Jay-Z has managed to make Tidal culturally relevant. This cultural relevance also plays a big role in Square’s interest.
Secondly, Cash App, your rapper’s favorite smartphone-based payments and money transfer service owned by Square has proven to be its cash cow, raking in $849 million in gross profit in 2020, and is now worth $40 billion. First created back in 2013, Cash App’s valuation is almost two-thirds of Square’s current $65 billion market value.
A major component to Cash App’s growth lies in its utilization of hip hop influencers, who’ve worked wonders in helping the platform grow its monthly active users from seven million in 2017, to 30 million in 2020. About 200 hip-hop artists name-check Cash App in their lyrics, according to music database Genius. This is where Tidal and its roster of rap all-stars can come into play. Square, through Cash App already has a taste for music streaming companies through its partnership with Spotify (SPOT -3.52%), which allows fans to pay artists directly via its platform. Perhaps this is something the company will be doing with artists on Tidal as well.
What’s Next: What’s even more interesting, is all the other things Square could leverage its new portfolio company to do, in terms of having a bigger stake in the music business. Perhaps the company, or one of its subsidiaries may be interested in fully getting into the music industry with its own record label. The crazy thing is Square has the capital to make something like this a reality, and Jay-Z did own his own record label, so it would bring this Tidal and Square deal full circle.
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