Protocol: “Jack Dorsey is so money: What Tidal and banking do for Square”

Square could build out credit or other products or tools for artists. Even though Tidal has been declining as a streaming service, they have a strong brand and access to artists, said Laura Chau, partner at Canaan. With Square buying Tidal, they essentially are buying access to those artists and circumventing the creator acquisition challenge that many emerging companies will have.

The flip side is that there are already a plethora of creator services companies out there, helping bands with everything from playlist sharing to merchandise sales. Those companies include Spotify, which has been looking to offer musicians more tools after acquiring artistry services startups SoundBetter and Soundtrap. It’s super crowded right now, Hu said.

The one major differentiator for Square could be its financial services business, freshly strengthened with its own chartered bank. That is one of the growth areas, Mulligan said. The company could offer artists advances, royalty processing and more, effectively taking over some of the roles traditionally held by record labels.

Benjamin Pimentel, Tomio Geron & Janko Roettgers

This is one scenario in which the unlikely business association between Square and Tidal may prove beneficial to both parties: Square’s recently approved banking subsidiary providing funds for emerging artists, similarly to artists advances from music labels. From this perspective, this collaboration makes more sense than Twitter’s Super Follows, because it at least starts with a product people are clearly willing to pay for (music) – although nothing is preventing Jack Dorsey from involving his payments company Square into Twitter’s subscriptions initiatives.

Square created ecosystems of tools for sellers & individuals, and we’ll do the same for artists. We’ll work on entirely new listening experiences to bring fans closer together, simple integrations for merch sales, modern collaboration tools, and new complementary revenue streams.

— jack (@jack) March 4, 2021

But it remains to be seen if Tidal can recruit good talent to grow and turn into celebrities – after all, the company has remained small and struggled to become profitable. At one point it was reportedly in talks with Apple about being acquired. I suspect it will not be able to circumvent the poor profitability of the music industry: the majority of artists fail to ‘break out’ and generate big returns on investment, so a small group of stars effectively subsidize the advances and costs of the less successful. It will be interesting to see if Square and Tidal can find a novel solution to this redistribution problem, and if not, how willing superstars will be to share their profits with other musicians under contract with Tidal.

Square’s bet on Tidal is unlikely to shake up the streaming world in the short term. Tidal has not released any subscriber numbers for some time, but data shared by digital music wholesaler CD Baby suggests that the service is little more than an also-ran. CD Baby, which distributed the music of 800,000 independent artists, received 40% of its digital revenue from Spotify, with Apple Music accounting for 18%. Tidal, Deezer, Napster and other third-tier services together made up just 8% of CD Baby’s digital revenue.