Jay Z was asked last week about the possibility that music fans would have to make a choice among streaming services based on which artists they carry exclusively. Given the star power of the musicians behind Tidal, a collective decision to punish competing services by producing exclusive content for Tidal could be its primary competitive advantage. His answer: eventually.
The process seems to have started. Over the weekend, Beyonce and Rihanna—both Tidal backers—released exclusives for the service. By Monday morning, Jay Z’s first (and best) album, Reasonable Doubt, had disappeared from Spotify. The difference between Spotify and Tidal is now just a couple of songs, but the moves point to a future for the music industry that would be more confusing for fans and probably less lucrative for artists.
If music services were to begin competing on the basis of which music they carry, fans would either have to subscribe to more than one, jettison some artists, or get music that wasn’t available through their subscriptions in other ways. If they did this by buying a few digital full albums a year, it would mean more money for artists. If they listened to more songs on YouTube, it would probably mean less. If they went to pirate sites for their fix, it would mean no money at all. Tidal argues that artists would do well to choose it over the competition because it is offering higher per-stream royalties. But that could still spell less money if it means the songs are played less often.
It’s not yet clear how far Tidal plans on going with exclusive releases. Roc Nation, Jay Z’s label, didn’t respond to a request for comment. Most of his music remains on Spotify, and Reasonable Doubt is available free on RDio’s competing service. But the plan is to increase the pressure on fans to choose, perhaps through deals not only with artists but with concert promoters and other parts of the industry. (His label already has a deal with Live Nation.)
“At some point, they’ll be faced with that decision,” Jay Z told a group of students at the Clive Davis Institute of Recorded Music. “Again, there will be other things. This isn’t just about music; it’s also about concert ticketing. It’s a holistic place where the artists will live in. You may be able to download a song for free, but you’re not getting into concerts for free. There are different things that we offer. It’s not just songs—we’re offering value.”
The last major artist to remove a catalog from Spotify was Taylor Swift, who withheld her newest album from the service last November and then removed her songs altogether. Swift and Jay Z have two things in common. First, they both oppose Spotify’s free subscriptions, by which people don’t pay but agree to listen to ads. Artists make money when their songs are played through free subscriptions, but the rates are lower. Tidal, Swift, and others argue that this devalues music overall.
Second, they have an unusual amount of control over how their music is distributed. Taylor Swift is the driving force behind Big Machine; Jay Z owns Roc Nation. Artists signed to major labels have far less leverage when it comes to demanding specific conditions from streaming deals, and they don’t have the financial freedom to sacrifice income from Spotify to throw their weight around.
The major record labels have a strong incentive to continue to distribute their music across all of the major streaming services. It’s less clear that they’re interested in maintaining the same structure of free and paid tiers. Last month, the Financial Times reported that Universal Music Group was trying to place new restrictions on Spotify’s free service as part of contract negotiations. Other labels have made similar noises. Since the first round of deals were negotiated, both Tidal and Apple’s Beats services have launched without free tiers, giving labels more leverage to push Spotify in the same direction. Even if Tidal doesn’t end up keeping Spotify users from hearing some of their favorite songs, it could end up making it harder to listen to those songs without paying a monthly subscription fee.