Jay-Z's Tidal Is Tone Deaf And Won't Save The Music Industry

It’s hard to know what Jay-Z was thinking when he launched music streaming service Tidal. He certainly wasn’t thinking about his millions of fans. Most consumers don’t want to pay for music. Any streaming business that ignores that reality is doomed to fail.

Tidal is the latest entry in an increasingly crowded field that already includes Spotify, Pandora , Google GOOGL +0.04% Play, iTunes and SoundCloud. While most of those services offer some kind of freemium experience (limited access in exchange for listening to ads) Tidal is money or nothing. Subscribers have to pay $10 per month for the basic service or $20 per month for “lossless” sound. (Lossless compression means that data is perfectly reconstructed. Most decompression technology creates an approximation of the original data.)

A ridiculously obnoxious press conference, featuring Jay-Z, Beyonce, Madonnaand a who’s who of overprivileged recording artists gave the service a small boost at the beginning of April.

Jay-Z’s Tidal is money or nothing.

But since then, Tidal has flopped worse than a Madonna movie.  By April 22, Tidal had fallen off of the iTunes top 700 apps chart. Musicians like Mumford & Sons and Lilly Allen have criticized the service calling it expensive and elitist and last weekend Jay-Z went on a Twitter rant defending Tidal against what he called “smear campaigns.”

Smear campaigns aren’t the problem. The real problem with Tidal is that Jay-Z and his business partners didn’t think at all about consumers when they launched the company.

The streaming music genie is already out of the bottle and it’s not going back in. For the vast majority of fans, streaming means listening to music for free. Spotify may have 60 million active users but only 15 million of them pay the $10 per month premium rate.

For Jay-Z and his buddies to come along and expect users to pay $10 or $20 per month for music is insane in this day and age. In order for that price point to make any sense Tidal would have to offer enormous amounts of exclusive content. Things like streaming concerts and curated playlists aren’t even close to enough to get fans to part with their money. If the Tidal folks had paid even a little bit of attention to consumers, they would have known that.

Instead Tidal looks like a money grab by a bunch of very rich performers.

The pitch for the platform is that it is artist owned. Subscription revenues go right to artists instead of to middlemen tech companies like Spotify and Pandora.

It’s not a terrible idea to have artists and songwriters collecting more of the money from streaming music. According to a recent study by Ernst & Young , artists get just 6.8% of royalty fees from streaming. Songwriters and publishers split 10%.

That’ s a pretty poor showing but the Tidal folks have their bows and arrows aimed at the wrong target. Streaming services have brought in millions in royalty payments that were being lost to piracy. Since it launched in 2008 Spotify has paid out $2 billion in royalties, half of that in the past year alone. Pandora paid out $446 million in royalties in 2014.

But most of that money is going to the record labels. The music industry has an internal problem with how royalty fees are handed out. Jay-Z would better serve the musicians he claims to care about by making his RocNation label an artist-owned business with royalties going directly to the people who are creating the music.

Artists deserve their fair share but it can’t come at the expense of using technology to make it easier for people to discover, pay for and listen to music. The revolution that Jay-Z wanted to launch? It’s already here. Streaming is helping small artists get discovered and it’s helping bands do the thing that actually makes them money — tour to sold-out shows. Artist Eric Hutchinson recently told Cnet that he was able to plan his tour based on information from Pandora about where people are streaming his music. He wasn’t getting much radio play in Seattle but there were plenty of people streaming his music there. He was able to sell high-priced VIP tickets to fans he otherwise wouldn’t have known about.The reason sites like Spotify (now valued at at $5.7 billion) are so popular is because they understand what consumers want and give it to them. Listeners haven’t wanted to pay for music for a very long time. Daniel Ek understood that and created a new model where most people can listen for free but many are still paying. Ads cover the rest of the cost.

By keeping consumers first, the music industry  has a chance to reshape itself into a business that makes money and passes it on the creative people who deserve to be paid for their work. But services like Tidal, that alienate the large audience of listeners who don’t want to pay for their music, are the wrong answer. Maybe sometime soon, even Jay-Z will realize that.