Does Apple Music Need Tidal (or Sherlocking) to Counter Spotify?

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Apple Music

Apple Music turned one on June 30th with more than 15 million paying subscribers—impressive, but still nowhere near rival Spotify, the biggest on-demand music streaming service with more than 100 million users, at least 30 million of which are paid subscribers.

So it came as no surprise when the Wall Street Journal reported that Apple is considered buying Tidal from Jay Z in a bid to take on Spotify. Such a deal would not only give it a boost in subscribers but also, presumably, exclusive access to artists ranging from Beyonce to Rihanna along with acquiring rights to Kanye West’s album The Life of Pablo.

Since Jay Z announced he paid $56 million to acquire and rebrand the former Aspiro in March 2015 as “the world’s first music service with High Fidelity sound quality, High Definition music videos and Curated Editorial, by music journalists,” Tidal has reached north of four million paying subscribers. But it also has been floundering out of the gate with executives leaving including CEO Andy Chen, employee layoffs and a lawsuit.

“Tidal is doing just fine,” Jay Z wrote on Twitter. “We have over 770,000 subs. We have been in business less than one month.” He continued: “The iTunes Store wasn’t built in a day. It took Spotify 9 years to be successful. We are here for the long haul. Please give us a chance to grow & get better.”

However, as The Ringer points out, the music deals that Tidal has brokered—such as its Prince exclusives—wouldn’t automatically transfer to Apple in the event of a sale:

It would have been boilerplate standard language in those agreements to say, ‘We’re granting you a nonexclusive license to use our masters, but you need our approval to assign those rights to any third party,’” says Steve Gordon, an entertainment lawyer and author of The Future of the Music Business. “They’re not acquiring Tidal’s rights to play music. They’re acquiring Tidal’s subscriber list.” The last major streaming service to fold was Rdio, and its sale to Pandora did not include licensing rights.

If anything, it would be eliminating a rival. As Re/code notes, a merger with Apple “would take Tidal off the market as a competitor for artist exclusives, which have created much of its buzz.” Indeed, Tidal has had its share of turmoil since Jay Z bought its parent company for $56 million in March last year, accusing seller Schibsted ASA of overstating subscriber numbers. Tidal has changed management several times and even attempted a sale to Samsung Electronics in March.

Apple Music boasts exclusive deals with Drake, Snoop Dog, Chance The Rapper and Dreezy, while Tidal has offered exclusive albums from Rihanna, Kanye West and Beyonce. All of those exclusives under one streaming music service roof could help lure more subscribers to Apple Music, especially fans of R&B and hip-hop.

Olivier Nusse, CEO of Universal Music France, told Bloomberg last week that it would be hard to see the value of a combined Apple Music and Tidal. “The streaming business is a very competitive market…. If, suddenly, they’re beginning to buy each other, this is not good.” Indeed, New York Times music reporter Ben Sisario hears that no such deal is in the works. “Two highly placed sources tell me that Apple is not buying Tidal,” he tweeted after the Wall Street Journal story broke.

As The Verge notes, “If Apple does manage to keep all the Tidal artists, it’s feasible that Apple could catch up with Spotify’s 30 million paid users in the next year or so (the acquisition of Tidal alone would push it to nearly 20 million paid subscribers), but that 100 million number looms large, and Apple will have to make some changes to reach that target.”

The promise of Tidal was Jay Z’s personal promise to other artists and friends of better fees and more control, so Apple Music’s acquisition of Tidal might signal it as the more artist-friendly service against Spotify—in the (unlikely) event that Apple would honor Jay Z’s deals with artists.

Spotify, meanwhile, is fighting back and accusing Apple of blocking its latest update to its music streaming app. “The problem is that there is not much that Spotify can do because it does not own the platform and Apple has already threatened to pull the app from the store entirely,” said Richard Windsor, analyst at Radio Free Mobile, to Bloomberg. “Complaints to regulators cost a fortune and take years, neither of which Spotify can afford.”

Bloomberg continues, “The practice of Apple trumping existing products with its own competing services has become known as ‘Sherlocking’ in the app developer community. The name stems from Sherlock, a search tool on Apple’s desktop computer operating systems that in the early 2000s was updated to incorporate the same tools that an external application had started offering just a few months previously.”

Apple countered that it’s not picking on Spotify. “We find it troubling that you are asking for exemptions to the rules we apply to all developers and are publicly resorting to rumors and half-truths about our service,” Apple’s lawyers fired back at Spotify’s attorneys in a strongly worded letter that has since leaked in its entirety.

“We did not alter our behavior or our rules when we introduced our own music streaming service or when Spotify became a competitor,” the letter continues. “Ironically, it is now Spotify that wants things to be different by asking for preferential treatment from Apple.”

Spotify, the most lucrative European startup with an estimated value of $8.5 billion, said it welcomes the competition from Apple Music. Spotify VP Jonathan Forster has said, “It’s great that Apple is in the game… They are definitely raising the profile of streaming. It is hard to build an industry on your own. Since Apple Music started we’ve been growing quicker and adding more users than before.”

One other Apple feature that Spotify (and Tidal) can’t boast, but which wouldn’t please music fans — though it would appease music labels and artists: its patent to block photos (and videos) on iPhones at concerts.

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