Square-Tidal Acquisition and Jay-Z’s Business Ingenuity

Square-Tidal Acquisition and Jay-Z’s Business Ingenuity

Square is acquiring Tidal, a music streaming company owned by rapper Shawn Carter, aka Jay-Z. Square, owned by Twitter founder and CEO Jack Dorsey will take a majority ownership stake in Tidal through a new joint venture.

The deal, worth $297 million is believed to be aimed at popularizing blockchain and exploring new ways to get artists paid valuably for the works.

“It comes down to a simple idea: finding new ways for artists to support their work. New ideas are found at the intersections, and we believe there’s a compelling one between music and the economy. Making the economy work for artists is similar to what Square has done for sellers,” Dorsey explained in a statement as to why payment company would acquire a streaming company.

Dorsey said Tidal will learn from the ecosystems of tools for sellers of all sizes and individuals through Cash App, which Square created, to develop new tools for artists. The ecosystem will be based on developing “entirely new listening experiences to bring fans closer together, simple integrations for merch sales, modern collaboration tools, and new complementary revenue streams,” he said.

Jay-Z (Tidal) and Jack (Square)

Experts believe Dorsey will likely adopt the blockchain and cryptocurrency technology that he has become a popular fan of.

“You need the applications to drive the new economy. No one’s going to just go get a cryptocurrency wallet if there’s nothing to buy,” Avivah Litan, a technology analyst at consulting company Gartner said.

The little use of bitcoin for day to day transactions has been a major concern for investors and regulators, who are worried about its volatility. Dorsey’s aim has been to create a decentralized ecosystem where transactions will be solely on blockchain.

Jay-Z bought Tidal in 2015 from Norwegian entrepreneurs for about $56 million, and it has since grown to have presence in more than 56 countries, with the backing of popular artists such as Kanye West, Madonna, Beyonce’, Rihanna and Nicki Minaj among others. The acquisition has put Tidal’s value around $450 million, a stag leap from its 2019’s $150 million value.

The acquisition may become the game changer in the stream industry that upcoming artists who have struggled to generate enough revenue from their music have been praying for. Tidal has distinguished itself from rivals like Spotify and BoomPlay etc., by offering higher sound quality to listeners and a greater share of revenue to artists.

But the question remains whether using blockchain will power Dorsey’s vision to a success. Martha Bennett, an analyst at the consulting firm Forrester, said companies and artists already trying to sell music directly to fans through a blockchain-based system have had limited success.

“When you think purely about breaking into the market, if somebody with the brand name of Jay-Z and Beyonce don’t manage to break the stranglehold of the well-established streaming platforms then who else can,” she said.

The idea of blockchain pleases Dorsey because of its decentralized system which enables people to store data and process transactions without relying on intermediaries who take commissions for their services.

Putting Tidal on blockchain technology will mean little or no charges on the earnings of artists from streams. But it will take more than building the platform to make the idea widely acceptable. Other obstacles such as some governments’ resistant attitude toward blockchain technology will likely stand in the way in some countries like Nigeria, India etc.

Under the deal, Jay-Z will have a seat at the Square board. Forbes said he bought back 33% of Tidal from T-Mobile earlier this week and then sold it together with the third he already owned, pocketing $149 million in cash and stock. His net worth jumped 40% following the two deals he closed in the last two weeks, including his champagne brand Armand de Brignac.

Jay-Z’s fortune climbed $1.4 billion after closing the two deals. He sold half of his shares in the Armand de Brignac brand, shooting the company’s value up to $640 million.

Jay-Z business ingenuity made him the first hip-hop billionaire, breaking the shackles of reckless spending that has characterized the music industry over the years.

In 2005, Jay-Z said “I’m not a businessman, I’m a business, man.” With his many smart investments, including in Uber, salad chain Sweetgreen, insurance startup Ethos and SpaceX, Jay-Z is not only making a difference among his peers, he is also living his prophetic words.

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