Jay Z Takes On Apple Inc., Google, Spotify In Increasingly Crowded Music Service Market. Can Anyone Make Money?

"I'm not a businessman, I'm a business, man," hip-hop mogul and entrepreneur Jay Z, famously said. The rapper, also known as Shawn Carter, 45, is looking to enter the streaming music business with the purchase of Swedish tech firm Aspiro for 464 million Swedish crowns ($56.2 million) in cash.

Aspiro’s portfolio consists of two streaming services: Tidal and Wimp, which is ad-free. Both boast higher-fidelity streams than the compressed audio files used by most streaming services. It's a potential differentiator in what's turning into a very crowded market including the likes of Spotify, Rdio, Deezer, YouTube Music Key, Beats Music and more.

Both services also provide curation similar to that found on Apple Inc.’s Beats Music and Google’s Songza, such as music recommendations and tailored playlists as well as music videos picked by editorial teams. With many services boasting label deals on roughly the same terms, the competition may boil down to unique content, much like the video streaming wars being waged by Netflix, Amazon and HBO.

Hi-Fi

High-quality audio may be a differentiator for Aspiro’s services. Yet there are doubts whether the feature will have enough mass-market sway for users to sign up. The market for high-quality audio is more niche than mass, Paul Verna, senior analyst at eMarketer and former pro audio editor at Billboard, said in a previous interview with International Business Times. And even if consumers are interested, most don’t have the right equipment to take advantage of the sound difference.

Still, companies are taking notice of the niche market, including Neil Young with his PonoMusic player and more recently Sony, which introduced a high-fidelity Walkman that costs $1,200.

Wimp, established in 2010, is currently limited to Denmark, Germany, Norway, Poland and Sweden. As of October it had 512,000 subscribers, according to company filings. Its sibling service, Tidal, is available in the U.S., Canada, the U.K., Ireland, Finland, the Netherlands, Belgium and Luxembourg. But users have to pay a premium of $20 to access the service, double the cost of Beats Music and other competitors.

It’s a far cry from Spotify, which boasts more than 15 million paid subscribers and 60 million total. Aspiro’s subscription numbers put it more in line with Beats Music, which said it had 250,000 subscribers in May.

Label Deals

Looking past the subscriber numbers, maybe the users aren’t what Jay Z is after by acquiring Asprio.

When Apple Inc. acquired Beats Music and Beats Electronics last year for $3 billion total, it paid less than $500 million for the streaming service. But what it got was more than the platform and its hundreds of thousands of subscribers. It also received the extensive licensing deals struck with every major record label and thousands of independent labels and distributors.

Aspiro has similar deals in place for its Tidal service, which launched in October. While the service is currently limited to eight countries, Tidal has the possibility of expanding to more than 50 countries using its current licensing agreements, according to company filings. The Jay Z deal is expected to close in mid-March, pending regulatory and shareholder approval of the offer.