Why Sprint and Tidal Are Hustling Music Together

Tidal needs a financial partner. Sprint needs new customers. The two businesses just took a step toward addressing each other’s needs. Sprint has announced a 33-percent stake in Tidal, which will “give Sprint’s 45 million retail customers unlimited access to exclusive artist content not available anywhere else,” according to a press release. In other words, the relationship promises to deliver content from Tidal artists only to Sprint’s current and new customers. Sprint’s chief executive officer, Marcelo Claure, will also join Tidal’s board of directors.

The Sprint/Tidal partnership is another example of artists and brands joining forces to distribute content. The premise of these co-brands is simple: artists provide content that the brands can hustle to acquire and retain customers or to generate awareness for a brand and its products or services. The brands give the artists a distribution platform for their music. (When a business uses an artist’s song in an advertisement, a similar principal applies: the business uses the artist’s music as a hook to get the attention of consumers, and the artist gets exposure). The Sprint/Tidal relationship contains two important elements:

  • Exclusivity: Sprint will rely on Tidal to provide content available only to Sprint customers. That content could potentially assume a variety of forms, including the release of exclusive songs, concerts, video, and experiences involving augmented reality and mixed reality.
  • Commitment: as noted in the press release, the relationship will “include the establishment of a dedicated marketing fund specifically for artists. The fund will allow artists the flexibility to create and share their work with and for their fans.” According to Billboard, the fund will consist of $75 million annually.

Jay Z, the major owner and founder of Tidal, has a well-established track record for forming distribution deals with brands. He created the template for the Sprint/Tidal deal in 2014 when he and Samsung agreed to distribute one million copies of his Magna Carta Holy Grail album through a special app exclusively on Samsung phones before the album went on sale publicly. Samsung reportedly paid $5 for every album, meaning Magna Carta Holy Grail sold $5 million before a consumer purchased a single copy. Samsung became a music distributor overnight (a model that Samsung later repeated with Rihanna).

Jay Z rebooted Tidal amid considerable fanfare after buying the company in 2015 with the promise of high-quality streaming content from an artist-owned business. (At the time, Sprint was exploring but did not commit to a relationship with Tidal.) But Tidal’s journey since then has been problematic, with the company losing millions and suffering some high-profile PR problems. Tidal said it enjoyed an increase in users after Beyoncé launched Lemonade exclusively on the streaming service before making the album widely available, and, overall, Tidal claims more than three million subscribers — but the company has been accused of inflating its numbers.

Meanwhile, Sprint is looking for leverage in its war with AT&T, T-Mobile, and Verizon to acquire and retain wireless customers. Verizon Wireless leads the pack, with nearly 144 million U.S. subscribers, while Sprint ranks a distant fourth, with 60.2 million subscribers. T-Mobile, with 71.5 million subscribers, claims that the carrier stole nearly a million subscribers from its rivals in the third quarter of 2016, including 300,000 from Sprint.

For Sprint, one answer to fighting back is to provide exclusive content and customer experiences. For years, telecom carriers have tried to out-do each other by offering so many combinations of services and billing options that the industry has become a bewildering experience for consumers. There are only so many ways a telecommunications carrier can continue to offer service packages. Providing interesting content and customer experiences is a way to differentiate, which is why Sprint recently signed a relationship with Niantic to offer branded Pokemon GO experiences.

Sprint has been offering music content for quite some time. In 2005, Sprint launched the Sprint Music Store, a partnership with labels such as EMI and Sony BMG Music Entertainment to sell songs. Sprint learned early on how to hustle music to acquire customers, for instance giving away five free songs to customers at launch. In 2007, Sprint was the official wireless sponsor of the MTV Music Awards. Sprint was more than a sponsor, though — it distributed content, offering a free live simulcast to Sprint Power Vision customers. In 2011, Sprint launched Sprint Music Plus, a free app for Android users to organize their music libraries and purchase songs and ringtones.

Sprint’s efforts to date have largely centered on song downloading. With the Tidal relationship, Sprint has updated its music distribution model for the age of song streaming. And for all its operational problems, Tidal possesses a brand name and the backing of not only Jay Z but also founding artists such as Beyoncé, J. Cole, Nicki Minaj, and Rihanna. (J. Cole recently released a surprise documentary, Eyez, on Tidal).

The Tidal deal gives Sprint a wellspring of music content that will target younger consumers with the powerful lure of new music — so long as Tidal continues to develop fresh artists, which is why I am especially intrigued by Sprint and Tidal earmarking funds to market artists. The fund could be a boon especially for developing emerging artists who need the money far more than Rihanna does.

Here is a golden opportunity for Sprint to develop its image as a forward thinking lifestyle brand of the future by developing up-and-coming artists, as many other brands have done so through an association with music. For instance, Converse operates the Rubber Tracks recording studio to give emerging artists free studio time. Coca-Cola has given exposure to new artists around the world through initiatives such as “52 Songs of Happiness.” Potentially, Sprint could offer its customers a first-look at emerging artists on Tidal, thus providing its customers a sense of hipness that comes with being the first in the know.

The proof of the pudding will be how well Tidal helps Sprint acquire and retain customers, which is a measurable number. If Tidal helps Sprint create momentum, Sprint’s shareholders will sing a happy song. If not, Sprint will inherit a bit more than 99 problems. Stay tuned.

Apple Pays Dearly for U2’s “Free” Music

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Photo credit: Marcio Jose Sanchez, AP

Let’s get something straight: U2 did not give away its new album, Songs of Innocence. To be sure, if you have iTunes, on September 9 you received a free copy (without asking for it) of Songs of Innocence. But Apple paid U2 an undisclosed amount to distribute copies of U2’s album to as many as 500 million iTunes subscribers — a deal announced on September 9 as part of Apple’s roll-out of the iPhone 6 and Apple Watch. Now, let’s do some math: in 2013, Samsung paid Jay Z $5 million to distribute 1 million copies of Magna Carta Holy Grail. Consider the lucrative sum U2 must be scoring ($30 million according to one estimate). And ponder, if you will, the $100 million marketing campaign the band is getting courtesy of Apple. These old rockers from Ireland have found a way to make a killing off a dying art form.

The distribution deal has created some backlash for both Apple and U2. For instance, music blogger Bob Lefsetz wondered why U2 would choose iTunes as its distribution platform, when more popular (e.g., YouTube) and hip (e.g., Spotify) distribution platforms are available. “They’d have been better off releasing it on YouTube, that’s where the digital generation goes for music,” he wrote. “iTunes is a backwater. It may be the number one sales outlet, but it’s not the number one music platform, not even close.” Plus, the approach of a forced distribution of content on to 500 million iTunes accounts is being viewed by many as obtrusive.

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Photo credit: Peter Neill

On the other hand, what is a rock group supposed to do in order to make money off its music in the digital age? Album sales have reached an all-time low. Getting noticed for your art is harder than ever at a time when music is just background noise for our digital games, advertisements, and movies. Musicians are not making money off streaming services, and YouTube is hardly a sure bet to monetize music. No wonder Kiss frontman Gene Simmons recently declared that “rock is finally dead.”

Yes, dropping content into our iTunes account without our permission is a controversial move. But the approach is fresh and new, and the old ways are not working anymore in the music industry. The relationship with Apple has given U2 two precious assets: money and attention. By participating in the most important and high-profile day in Tim Cook’s history as Apple’s CEO, U2 has turned an album launch into a global event. Tell me: who else can do that? The $100 million marketing campaign will keep the album in the public eye in the run-up to Universal’s official release of Songs of Innocence October 13 — and, more importantly, will serve as advance notice for the inevitable tour.

And you can be sure a tour is coming. Because that’s why albums still matter: as a launching pad for other revenue streams, such as tours and merchandising deals. U2’s last tour raked in $736 million from 2009-2011. U2 just primed the pump for what comes next.

Update, 22 September 2014: since I wrote this post, the backlash against Apple and U2 that I mentioned has intensified, obviously. As Adweek reported, social media sentiment dropped for U2 by 41 percent in the wake of the deal. My take: years from now, the U2/Apple (and similar Jay Z/Samsung album drop from 2013) will be viewed as flawed but necessary experiments in monetizing music, and others will improve upon those approaches.

Can Wu-Tang Clan Save the Record Album with “Once Upon a Time in Shaolin”?

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When I first heard that trailblazing rap collective Wu-Tang Clan intends to release just one copy of its new album, Once Upon a Time in Shaolin, I stopped what I was doing and had to learn more. And therein lies the point of  Wu-Tang Clan’s strategy: create intrigue for a fading art form, the record album.

The album has become practically an anachronism in the era of digital disposable content. Listening to an album all the way through requires focused attention. But consumers like to stream our music in small morsels while we’re shopping, exercising, gaming, and generally doing anything but focusing our attention on music. It’s no wonder that album sales continue to decline, decreasing by 8.4 percent in 2013, including a downturn for digital albums.

Enter Wu-Tang Clan, which made one of the most influential rap albums of all time, Enter the Wu-Tang (36 Chambers), in 1993 (long before album sales started their decline).

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The strategy behind Enter the Wu-Tang — the group’s first album — was as inventive as its sound. The group wanted Enter the Wu-Tang to be a launching pad for the careers of its individual members (not just Wu-Tang Clan, per se) and the approach worked: Method Man, RZA, Raekwon, Continue reading

Jay-Z Writes New Rules for Music Millionaires

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Jay-Z says he’s writing new rules. But for whom?

The multi-millionaire rapper created a firestorm of PR by launching an innovative deal with Samsung to distribute 1 million copies of his new Magna Carta Holy Grail album through a special app exclusively on Samsung phones before the album went on sale publicly July 9. Samsung reportedly paid $5 for every album, meaning Magna Carta Holy Grail sold $5 million before a consumer purchased a single copy. Samsung became a music distributor overnight. And the Recording Industry Association of America was inspired to change the way it tracks the sale of digital albums to account for the 1 million units sold instantly.  It’s no wonder Jay-Z has been tweeting about creating #newrules, and Billboard has gushed about “Jay-Z’s New Blueprint.”

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Essentially, two big brands, Jay-Z and Samsung, are distributing music together as Jay-Z and Nokia did 10 years ago. But how repeatable is the Jay-Z model for the entire music industry? The example of Radiohead is instructive. Radiohead, another Continue reading