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Last Sunday, music mogul Shawn Carter, better known by his stage name, Jay Z, was moved to come out of hibernation and post a series of rare tweets defending his recently purchased Tidal music streaming service.
Reacting to a spate of negative publicity about the failure of the service after he purchased it for $56 million (R668.83 million) from Norwegian media technology company Aspiro in January, the hip-hop superstar said it was “doing just fine”, with more than 770 000 subscribers.
Carter – who has a string of business interests including Roc-A-Fella Records and the Roc Nation entertainment company – also referred to many big companies spending millions on a smear campaign.
This is the latest high-profile instalment in the battle for online streaming subscribers, which is heating up as CD and even digital download sales decline.
Nielsen SoundScan, which compiles data from more than 39 000 global retail outlets, found that CD sales in the US fell 15% last year compared with 2013. Digital track sales fell 13%. However, streaming rose 54%.
Some recording companies reportedly woke up to the potential of streaming services years ago.
According to IT news site TechCrunch, groups such as EMI, Warner Music, Universal Music and Sony BMG owned stakes ranging from 1.9% to 5.8% in Swedish start-up Spotify – the world’s largest subscription streaming service – by 2009.
Universal’s parent company, Vivendi, listed Spotify as an “available for sale” security worth €143 million (R1.9 billion) in its latest published annual report, along with a holding in Beats Electronics worth €161 million.
Beats, co-founded by rapper Dr Dre, includes a streaming service, Beats Music, and was purchased by iPhone maker Apple for $3 billion last year.
Warner Music’s parent company, Access Industries, also has a holding in French streaming service Deezer, in which it recently invested €100 million.
It is unclear what record companies get from their equity. The start-ups do not issue financial reports, but Spotify makes its money from advertisements targeted at users on its free streaming service, as well as from subscribers who pay $120 a year for a premium, ad-free service.
It pays out about 70% of its revenue as royalties to people or companies holding the rights to the music it streams – most often the record companies themselves. The rights holders, in turn, split the revenue with artists.
Spotify CEO Daniel Ek said the start-up had paid $2 billion in royalties since it was founded in 2008.
In contrast, Tidal’s equity is owned by its artists – including Alicia Keys, Beyoncé and Kanye West – and pays out 75%, according to Carter
