Tidal Makes a Big Bet on Independent Artists

Last week, Tidal made its first big announcement since Square acquired the company earlier this year. Here's what's coming soon:

- a free subscription tier (ad-supported)

- high-fidelity sound (HIFI) for its $10/mo tier

- direct artist payouts - 10% of the subscriber revenue (at $20/mo tier) goes to each listeners' most-streamed artist each month

- fan-centered royalties (each subscriber's revenue goes directly to the artists that they listen to)

This is the start of Tidal's plan to build an artist-centric platform, primarily for independent artists. It wants to give artists resources through Cash App Studios, help them release music through Tidal, and give their fans more ways to reward them (e.g. direct artist payouts, fan-centered royalties, or tips on Twitter). That's the Square-Twitter-creator flywheel in motion.

Here's what I wrote last month when Cash App Studios was announced:

"But what if Tidal evolves? Both [Square CEO and founder Jack Dorsey] and Jay Z want an artist-centric platform. I could see Tidal pivoting to enable fans to subscribe directly to an artist, instead of the platform. Paid fans could get exclusive previews of music (e.g. Twitch, but with on-demand streaming built-in). Down the road, it can expand to NFTs, tokens, and other Web 3.0 related opportunities."

These changes didn't happen yet, but it's still early! It's trending in that direction though‍

The creator economy's influence on music. Tidal's biggest move is its fan-centered royalties. It follows SoundCloud, which launched a similar initiative back in March. Since artists are paid out at the individual level, streams are not aggregated overall. As a result, artists with smaller but passionate fanbases should earn more revenue. Digital streaming providers like SoundCloud, Tidal, and Audiomack are focused on bridging the gap between artists and fans, so this model is in their wheelhouse.

The direct artist payout can offer a nice Patreon-style bump from the biggest supporters, especially if Tidal lets the artists know who those fans are.

But what if Jay Z himself became one of the biggest beneficiaries of direct artist payouts?? A lot of people have kept Tidal subscriptions to support him as a Black business leader and an artist they love. The program was obviously not designed to pad Hov's pockets, but I won't be surprised if The Carters get a bump from this.

‍Future acquisitions? I expect Square and Tidal to enable tipping, crowdfunding, merchandise selling, and an NFT marketplace. That's a lot to do at once though, so I bet Square makes more big acquisitions in the music tech and creator space.

‍Spotify's Q3 earnings call is a reminder of impactful its acquisitions of Megaphone and Anchor have been in podcasting, where Spotify is now #1 in the U.S. If Square wants to be the #1 artist-centric platform, it needs a few more eight and nine-figure investments to accelerate that timeline. Both Cash App and Square's Seller business are doing well, so the company has the money to invest.

‍Why the other streaming services won't follow. Despite's Tidal and SoundCloud's royalty payment shift, I highly doubt we will ever see fan-centered royalties from Spotify, Apple, and Amazon.

Their primary stakeholders are the major record labels. The majors thrive on the consistency of the aggregated streaming model. The aggregated revenue is less volatile and more favorable to the biggest artists in the world and the record label's back catalog of music, which together account for a majority of streams. The majors wouldn't want to risk losing revenue from customers who log into their paid accounts once or twice per month and only listen to a handful of tracks from a lesser-known artist.

This is why it's harder to lump all digital streaming providers together. Music streaming may feel somewhat commoditized, but that may change as each company leans into its specific focus area whether it's podcasting (Spotify), be the "top of funnel" for other products the company offers (Apple and Amazon), or a bridge between artists and fans (Tidal, Audiomack, SoundCloud).

Read more about Tidal's changes in Variety.