Wednesday, April 1, 2015

Tidal vs Spotify: Understanding Your Competitors

On March 30th, Rap mogul Jay Z held a conference to announce his new subscription music-streaming platform Tidal. Within the music streaming realm there is a wide variety of offerings. Tidal boasts about being the first artist-owned streaming system, allowing proceeds to go directly to the artists. Additionally, Tidal claims to be “the first music streaming service that combines the best High Fidelity sound quality, High Definition music videos and expertly Curated Editorial.”

The question on everyone’s mind is whether Jay Z has actually sized up his competitors. To spare Jay Z the effort of doing the man labor I will provide a competitor analysis free to the public. You’re welcome Shawn Carter.

The following questions were presented in Competitor Analysis: Understand Your Opponents:

1. “Where are you competing?”

Jay Z has openly stated that he is attempting to be the Netflix of the music industry. Music streaming has become the industry’s fastest-growing revenue source[1] and seems to only be expanding.

2. “Who are your competitors?”

The biggest competitor Tidal is contending with is Spotify, which has 60 million users internationally, of which 15 million are paying subscribers.[2] Since its launch in 2008 Spotify has cornered the market through its tiered payment system and has a full 8-year advantage over Tidal. Despite the advantage of time and a loyal consumer base Spotify is lacking in support from musical artists. Most recently, Taylor Swift, who is estimated at a net worth of $64 Million[3], pulled all of her music from Spotify as she believes that her music is not being valued at what its worth.[4]

In The Five Competitive Forces That Shape Strategy, Michael Porter describes the occurrence of powerful suppliers who are able to capture more value for themselves by limiting services. This seems to be the strategy Jay Z is taking as he encourages more music artists to pull their albums from free sites and to acquire equity from Tidal. In this way, music artists are suppliers of the good, leaving the consumers at will to the demands of the musicians. This creates a very attractive area, IF Jay Z is able to pull a large enough musical artist base.

3. “How attractive is the competitive area?”

Despite freshly entering the market, the competitive area is still highly attractive. Due to a large portion of their generated revenue going to paying off revenues, Spotify is unable to generate higher percentages of profit gain despite the market growth. With the artist owned business model Tidal will eliminate the need for spending on royalties, therefore more money is going into the business. As mentioned above, IF Jay Z is able to convince enough artists to make the switch to Tidal he will effectively win out his competitor.

I am a loyal user of spotify (free) but I am also a Beyonce loyalist and I respect a good strategic business model. This analysis has allowed me to better understand the offerings of each service. Within the next year I am interested to see how Tidal is able to push innovation through its competitive strategy to increase their own market shares.

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