Why Jay Z’s Streaming Purchase is a Smart Move

Jay Z will close the deal on Aspiro, the company behind streaming services WiMP and Tidal. Few artists or executives could bring more value to a music streaming company that’s trying to gain a foothold in a growing market.
There are only two ways to get a streaming service — buy it or build it — and buying a top service would be cost prohibitive. Other than building from scratch, the other option is to buy a less expensive service and build it into a large, more competitive business.
Jay Z will pay $56 million for Aspiro. It’s a good price. WiMP had around 512k subscribers at end of Q3. That works out to $109 per subscriber — less than one year of revenue at $10 a month. WiMP is extremely popular in Scandinavian countries, and owner of Tidal, which operates in Norway, WiMP poses one of the largest threats to Spotify. It remains to be seen whether Jay Z’s savviness can put WiMP in the top spot for the rest of Europe and, eventually, the United States. Spotify isn’t Jay’s only competition, however; he’ll also have to battle it out with fellow rapper Dr. Dre, whose streaming service Beats Music was recently acquired by Apple.
Jay Z could add tremendous value to WiMP and Tidal with his person brand. He can do this in two key areas: awareness and content. Between Jay Z, his wife (Beyonce), the musicians Roc Nation is associated with (Calvin Harris, Rihanna, others) and athletes signed to his sports management agency (Kevin Durant, Robinson Cano, others), along with the various Roc Nation partners (Three Six Zero Group, Skull Candy), there are a dizzying number of opportunities to raise awareness of and promote the services.
Jay Z could also differentiate WiMP and Tidal by offering exclusive content not available at competing download stores or streaming services. Buying Aspiro would be a risk. But it would be an acquisition with tremendous upside and potential to turn a modest streaming company into an opportunity to have a stake in whatever the future of recorded music will become. That alone is worth $56 million.
Jay now joins the ranks of high profile musicians who have entered the music industry’s distribution side. With Neil Young’s hugely successful crowdfunding of his high-definition audio player, Pono, and the relaunch of Dr. Dre’s Beats Music service through Apple, Jay seems to be in great company.
Source: billboard.com, bet.com, Huffington Post

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