He set out to save the music industry from the economics of streaming, and make himself a fortune in the process. So far, Jay Z is doing neither
Like many rappers, Jay Z writes songs that have a paranoid streak. He lashes out against conservative cable news anchors, overzealous cops, lazy music critics, and less talented lyricists, all of whom, he insists, are out to get him because he’s famous. On May 16, Jay Z uncorked one of these bilious anthems, Say Hello, from his 10th studio album, American Gangster, at an exclusive performance for people who’ve signed up for Tidal, his subscription-only streaming-music service. Stalking the stage at New York’s Terminal 5, Jay Z addressed critics of his new venture, who have savaged it as tone-deaf, unimpressive, and—perhaps most wounding for a celebrity who famously boasted “I’m a business, man”—a lousy investment.
In a black baseball cap cocked to the side, several large gold chains, and a dark tunic with white stripes that looked like something a fashion-conscious crossing guard might wear, the mogul complained about how he’d been mischaracterized by his detractors. “They say I’m a bad guy,” he rapped. “That’s the picture they paint. They say a lot about me. Let me tell you what I ain’t.”
Jay Z unveiled Tidal at a press conference in late March, flanked by 15 of the biggest acts in the music business, including his wife, Beyoncé, Madonna, Nicki Minaj, Rihanna, Jack White, and Kanye West, all of whom were introduced as equity shareholders. Many seemed awkward and unprepared. Another owner, Alicia Keys, quoted Nietzsche and gushed about Tidal’s cultural significance: “We’re gathered … with one voice, in unity, in the hopes that today will be another one of those moments in time, a moment that will forever change the course of music history.” There was a lot of utopian rhetoric about restoring the value of music in the digital age. Less time was spent on new features, technology, or other reasons for listeners to try—and pay for—a Tidal subscription.
The backlash was immediate. Tidal’s detractors weren’t just the predictably vexatious music bloggers, who described the service as little more than a vehicle for musical plutocrats to line their pockets. The haters also included some of Jay Z’s peers. “They totally blew it by bringing out a bunch of millionaires and billionaires and propping them up onstage and then having them all complain about not being paid,” said Ben Gibbard, lead singer of the indie rock group Death Cab for Cutie. The habitually caustic Noel Gallagher of Oasis told Rolling Stone, “Do these people think they are the f—in’ Avengers? They are going to save the f—in’ [world]?” In late May Tidal hovered at No. 9 on the iTunes list of top-grossing music apps, trailing Slacker Radio.
At Terminal 5, Jay Z’s backup band halted in the middle of Say Hello to let him freestyle. He laid out the case for Tidal and skewered his competitors in verse: “So I’m the bad guy now, I hear, because I won’t go with the flow?” He said Apple executive Jimmy Iovine had offered him “a safety net,” presumably in the form of a payment for endorsing the company’s forthcoming streaming-music service, and that Google had “dangled around a crazy check.” (Apple and Google declined to comment.) Jay Z dissed “middlemen,” griping that YouTube paid him “a tenth” of what he deserved. “You know n—-s died for equal pay, right? You know when I work, I ain’t your slave, right?” Jay Z even drew parallels between his situation and the police killings of young black men such as Michael Brown and Freddie Gray.
Until now, Jay Z, whose real name is Shawn Carter, has had an almost unbroken record of success. A hip-hop Horatio Alger character, he rose from the bleak poverty of Brooklyn’s Marcy public housing projects to become one of the world’s most successful musical artists. He’s sold 34 million albums in the U.S. alone, according to Nielsen Music. Billboard estimates he made $22 million last year from musical activities. Apart from his artistic talent, Jay Z also aspires to be one of the world’s great businessmen. “I affiliate with Billy Gates, that’s my peer,” he once rapped. And: “You looking at the black Warren Buffett.”
A masterful extender of his own brand, Jay Z, whose net worth has been estimated at $520 million by Forbes, has co-founded a successful record company (Roc-A-Fella), clothing line (Rocawear), nightclub chain (the 40/40 Club), and management company (Roc Nation). He sprinkles his verses with boasts about products he’s designed (Hublot watches and Reebok S. Carter sneakers) and acquired (Armand de Brignac Champagne). “He’s taken the equity that he built as Jay Z and successfully abstracted it to a lifestyle brand,” says Jeff Kempler, a former senior vice president at the Island Def Jam label group and a member of Roc-A-Fella’s board in the early 2000s.
Tidal is Jay Z’s most ambitious venture yet—an effort to profit in an arena that’s thwarted not only other musicians but startups and venture capitalists, too. Many artists are unhappy with the economics of streaming, notably Taylor Swift, who pulled her albums from Spotify last November. Jay Z wants to do better on two levels. Tidal pays record labels and music publishers a higher royalty—75 percent of revenue, vs. Spotify’s 70 percent, boosting the value of music on the Internet, including his own. And as a large shareholder, he could sell off his stake at a profit if outside investors give Tidal a valuation approaching those of other digital-music platforms such as Pandora and Spotify.
Another possibility is that Jay Z, who declined to speak to Bloomberg Businessweek, will lose his entire investment in Aspiro, Tidal’s Norwegian parent company, which he purchased in March for $56 million. In streaming, he has formidable rivals. Spotify, the 9-year-old market leader, is valued at $8 billion, and it loses money. Three-quarters of its more than 60 million members use its free, ad-supported service rather than paying $9.99 for a monthly subscription. Smaller players such as Deezer and Rhapsody also lose money but have managed to stay afloat. Apple is expected to introduce its own product using Beats technology later this month at the same $9.99 subscription price—but the $757 billion company can afford to break even or even lose money on music as long as it sells more iPhones, iPads, and watches.
So what is Jay Z thinking? He turned 45 in December. The onetime street hustler is now a husband and a father and hobnobs with world leaders such as President Obama and Nicolas Sarkozy, the former president of France. Some say he has grander ambitions in middle age. “He’d like to be a billionaire,” says Rob Stone, co-founder of the Fader, a magazine that extensively covers the rap world. “He’s talked openly about that. But I think in his mind, it’s no longer just about how much money he’s making. It’s about his legacy and what the name Shawn Carter will mean after he’s gone.” He wants to save the music industry from the brutal economics of streaming—and make himself a fortune in the process. So far he’s doing neither.
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SOURCE: Bloomberg Business – Devin Leonard