Spring Tide: Square to Buy Jay-Z’s Tidal

Spring Tide: Square to Buy Jay-Z’s Tidal​

The Story

Jay-Z’s asset sell-off continues. This week, the rapper sold a majority stake of his streaming service, Tidal, to financial services and payments company, Square. The deal is expected to cost Square $297 million, and will be paid in a combination of cash and stock. As part of the deal, Jay-Z will take a seat on Square’s board of directors. Whilst a Fintech company acquiring a streaming service may seem strange, the founder and CEO of Square (and Twitter), Jack Dorsey, believes there is a natural crossroads between music and the economy (Financial Times). Mr Dorsey is also known to have a personal relationship with the rapper, with the two previously holidaying together in The Hamptons.

What It Means For Businesses and Law Firms

The deal is good for Jay-Z and Tidal, as Square may be able to take the business to new heights. Jay-Z, alongside the likes of Kanye West and Rihanna, bought Tidal in 2015 for $56 million. The plan was to revolutionise the streaming world, running a service “by artists, for artists” (Tidal). However, the platform has struggled to keep up with services such as Spotify and Apple Music. Tidal was touted as the exclusive home of music for artists such as Jay-Z and Beyoncé, with Jay-Z removing his music from Spotify. However, lack of market share caused Jay-Z to return to Spotify in 2019, perhaps signalling the plan hadn’t been successful. Subscriber figures show Tidal behind in the market; with Spotify having an estimated 155 million subscribers, Apple Music with 72 million, and Amazon Music with 55 million, these figures dwarf Tidal - which is estimated to only have between 3 and 5 million subscribers (Midia).

Square is a financial services app that helps send and spend money but also works as a transaction mechanism for businesses and investments in Bitcoin. The company’s iconic CEO may be most known for his role as founder/CEO of Twitter, but seems to be making serious inroads in the financial services sector. Dorsey’s Square reported record revenues of $9.49 billion for 2020, with its share price up 500% since the start of the pandemic, due to the boom in digital transactions (Square).

Dorsey believes he can turn around Tidal’s fortunes and utilise Square’s large customer base to do so. The music streaming service costs around $20 per month, and tends to rely on exclusive music. For Jay-Z, the reasons behind the deal may be similar to his recent deal with LVMH to sell a majority stake in his ‘Ace of Spades’ champagne brand. Both LVMH and Square have access to a larger market than Jay-Z’s companies do alone. This will allow Tidal to reach more listeners, and attract more subscribers - the key way to generating steady, long-term profit.

Square was advised by Gibson, Dunn & Crutcher, whilst Tidal sought advice on the deal from Reed Smith and Cummings & Lockwood. Lawyers will likely have been responsible for structuring the deal in terms of combining cash and stock, as well as facilitating Jay-Z’s ascent to Square’s board.

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