Done Deal: What Square’s $302 Million TIDAL Acquisition Means For Its Music Industry Ambitions
By CultureBanx Team
- Square closes on $350M TIDAL acquisition for a bigger stake in the music biz
- TIDAL will provide licensing deals with major record labels and recording artists who are involved with the company
Jay Z no longer has “99 Problems” since TIDAL’s $302 million Square acquisition finally closed. The financial services platform Square (SQ -0.90%) acquired 80% ownership in TIDAL, along with licensing deals with major record labels and recording artists who are involved with the company. Square wants 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. 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: Even though the deal was previously announced in March, Dorsey and Jay-Z just closed the deal on Friday and have solidified what could become the next big record label and music streaming platform. Square has the capital to spend, with Square reporting $3 billion in revenues in Q3 2020 along with $794 million in gross profits. It’s important to remember that TIDAL hasn’t taken off the way some would have imagined, but its existence is a cultural milestone that can't be denied. Jay-Z acquired the company in 2015 for $56 million, and at the time, 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 played a big role in Square’s interest.
Then there’s 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 acquire new customers. 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 for Square to have a bigger stake in the music business.
Cash, Culture & Music: Rappers have been using the fin-tech platform as a way to engage with fans for a while now. So it’s easy to see how hip-hop influencers and their loyal followers grew Cash App’s monthly active users from seven million in 2017, to 30 million in 2020. Square, through Cash App already has a taste for music streaming companies through its partnership with Spotify, which allows fans to pay artists directly via its platform. Perhaps this is something Square will be doing with artists on TIDAL as well.
Interestingly enough there are a plethora of 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 like Cash App may be interested in fully getting into the industry with its own record label. The crazy thing is Square has the capital to make something like this a reality, and Jay-Z has owned his own record label, so it would bring this TIDAL and Square deal full circle.
Situational Awareness: Let’s not forget the artist-owned and Jay-Z backed streaming company had been on deathwatch since inception, despite a $200 million cash injection from Sprint in mid 2017. Reports that it manipulates user streams, not paying royalties on time, and lying about subscribers, didn’t help TIDAL’s “by artist, for artist” narrative. Meanwhile, it remained a relatively small player in a cutthroat industry where topdog Spotify boasts 155 million premium subscribers. TIDAL is estimated to have closer to 1 million paid subscribers. If Square leverages the power of Cash App and it’s new found backdoor into the music industry, it could create one of the biggest record companies and music streaming platforms at the same time.
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