Something huge happened in digital audio this week. On Tuesday, Jay-Z took stage to announce the release of Tidal – the premium, hi-def music streaming service controlled by the artist themselves. Rihanna, Madonna, and Daft Punk all took the stage alongside him.
But no one performed.
Quite the opposite happened actually. Jay-Z and Co. announced that you could stream the highest quality versions of those artist’s songs and receive first access to new forms of content (live recordings, demos, early releases, etc.) for just $9.99 a month. The same price as Spotify.
A LOT has been said about Tidal in the days following its release, and I’ll get to my opinions on it soon enough – but first I want to talk through the semi-ironic place I was when the Tidal release occurred.
I decided when I started this blog that I would also start going to the many, many startup events that occur in NYC almost every day. I kept to that this week and attended an event called Product Council: Spotify and MotionTraxx. Herein lies the semi-irony; I found myself at an event devoted to Spotify’s newest ad “product” the night that the newest Spotify-killer was announced.
The event started with a founder presenting his app product, MotionTraxx, to a board of three product managers from Pivotal Labs and Soundcloud while everyone else listened in. Now, in tech, the word “product” has very different meanings than most people are used to and that’s why I put quotations around it earlier – a product can be any experience that a consumer has when interacting with your website, app, or digital product. In this case, the founder of MotionTraxx presented his mobile app product to the board and was looking for ways to increase engagement with his product by introducing a new feature. (Check it out here quickly before you go on! http://www.motiontraxx.com/index.php).
He had a few critical problems, all of which translated to great lessons for me.
The first thing the board roasted him on was data collection. The founder had excellent access to a demographic that is super exciting to ad agencies and audio companies – people working out. Except the founder had collected little to no data on these people.
Data is the lifeblood of tech. It is both the most exciting and terrifying power of technology products – you are able (and allowed) to collect a massive wealth of information on people that interact with your products. Right now, people typically use this data to generate massive advertising revenue – you collect a ton of users by offering them something great, collect data on them, get to know them, then sign up with an ad agency and target them with precision. The ad is only worth something if it has an impact, even if it makes just one person in a thousand buy the advertised item (i.e. why ad revenue is generated in CPMs or cost per impression). That’s why the quality of the users is important. This founder was missing out.
The second major issue was the paywall. The app allows you to use 1 free workout from its repertoire, and then slams you with a paywall – you have to pay to keep using the product. This was a huge problem for the app. People would have one great workout (he had excellent reviews from full users), and then immediately delete the app when presented with the paywall. it was also interesting that the app had actually acquired a decent group of consistent users. This indicated that while the product itself might be great, people are being scared away by the paywall. The product council pushed the founder on looking towards a model closer to “freemium” which more people are used to nowadays.
Ultimately, the founder was looking at the wrong solutions to his problems. The council was brutally intense, but accurate in their criticisms and the founder seemed grateful for the advice when I spoke to him after his presentation, albeit a little beat up.
After this, a very accomplished product manager from Spotify gave an awesome presentation on Spotify’s newest ad product, which I think is just genius, and I’m about to fangirl about it. The ad product is a 15-second video offer you can watch at the start of your listening session. If you choose to watch the video, Spotify offers you 30 minutes of ad-free listening in return! I think that this seemingly simplistic product is beyond genius. Essentially, Spotify is arbitraging video and audio CPMs. Video adverts earn more money per thousand impressions on average than sound adverts do. Why? Because they engage you in two ways as opposed to one, you are seeing and hearing about the advertised item rather than just hearing it. The beauty of the product is that Spotify is making their overall product more enticing to users while at the same time earning more money off of those same users! The one video ad at the start of their session actually earns more than the 3 or 4 audio ads you would have received in that thirty minutes.On top of ALL of that, the ad is served at the start of your sessions, so even if you don’t listen all the way through 30 minutes, you’ve already been monetized.
I know it seems weird that I am getting excited about being monetized, but really I was just floored by the simple brilliance of the ad product and I felt that I had learned a ton at this event.
This brings me to the reason I have become a Spotify Premium user even in light of the premium service being offered to me by Jay-Z. Spotify has all the songs I want to listen to. Spotify cares about my experience, and even tailors their advertising to be less obnoxious. I’m not worried about whether they are going to be here in a month or so. On the other hand, Tidal has both a lot going for it and a lot standing against it.
Why Tidal Wins:
This is a topic no one seems to want to discuss. How can Tidal win? I think that the service provides a potentially awesome platform for artists to streamline their production and distribution. Jay-Z and the collection of all-stars he has put together wield a great deal of power in the industry and have access to a lot of the tools that can make young artists successful. This is an area that Spotify is currently not great at and doesn’t even really compete in- finding great talent and getting it to market. This is the model currently pursued by super successful MCNs (multi-channel networks) like Maker Studios. They acquire the best video talent on sites like Youtube and leverage it for ad revenue and production studio access. Tidal could crush this market for audio with the power in their investor base.
Why Tidal Loses:
They try to beat Spotify at music streaming. It’s just not going to happen. Not enough people care about hi-fi audio for that to matter. And there is a very present stigma against making already rich music superstars even richer. Even if that is not the case, this is how Tidal currently looks to most of the public.
Next week, I am hoping to take a deeper dive in the world of digital audio and really pit Tidal against the market and see where it fits. Thanks for reading!
The Startup Student 