Yesterday Jay Z visited the Clive Davis Institute of Recorded Music at New York University to talk about his new streaming service Tidal, how it differs from other streaming services, and what the payout structure will be like. He was joined by Tidal executive Vania Schogel, and in front of a group of students, they participated in a Q&A session with NYU professor Errol Kolosine. You can read the entire thing below. It might help clear up a couple things you want to know about Hov’s latest business move.
How will Tidal change the industry with regards to artists’ bottom line? Spotify has received much criticism for the portion of revenue that the artists receive through their music being streamed there. Is Tidal a direct response to this criticism?
JAY Z: Not a direct response. You don’t want to single anyone out, per se — but currently we pay the highest royalty percentage. And there is no free tier service. If you have five people paying for music, and ten people consuming it, then the artist starts at -5. We start at 1. There is no free tier and we’ll pay the highest royalty percentage. That’s how we’ll change the industry, as well as through a number of other things which I’m sure you guys are gonna ask about, so, I don’t want to go too into it on the first question.
What’s the most difficult part about balancing being an artist yourself, staying true to your artistry, and also being a producer that needs to stay conscious about record sales?
JAY Z: When you’re in the studio, you’re just making music from your heart. For me, I’ve always been that way. I was an artist, I was executive producer on my first album so, I’ve always had to manage both. I couldn’t get a record deal. It wasn’t by choice — I couldn’t get a record deal, so I had to figure it out. We started by selling records out of the trunks of our cars. We went to some stores in Brooklyn and some other places and then we spread from there. I guess the short answer is: When you’re in the studio you’re an artist, and when you’re outside of that you’ve got to figure out how to get your music heard.
Will Tidal offer a student discount for subscriptions like Spotify does in the near future?
JAY Z: Oh. Okay, well I’m going to let Vania answer that one.
SCHLOGEL: Yes. When we look at the data, the data says that students don’t really care about paying for streaming. I actually don’t believe that, necessarily — I think that this demographic here, sitting in the room, cares very deeply about music. I think in fact that a lot of you have a deeper emotional connection with music than any data says. And so the short answer for that is, absolutely yes, because we want you all to be Team Tidal and to be a part of this.
How difficult is it for an indie artist to put their music onto Tidal? Services like Spotify can be very difficult, if not on a label or going through a digital distributor. Does the same apply for Tidal?
SCHLOGEL: There is that difficulty, I know, with other services. I’m not a musician, but some of my friends are and they tell me “I had to go through an aggregator, I had to wait six months for this and that and nobody paid attention to me.” And these are all things that we hear and that are very personal to us, and that we are addressing. The truth of the matter is, we took control of this company a few weeks ago. We’re still a very young, nascent company and we have a lot of initiatives that we’re working on, especially when it comes to indie talent, emerging talent, giving people visibility, giving people a forum to put their music up and giving them control of their distribution and their creative content, how they want to communicate with their fans. Those are all initiatives, and that one specifically is something that we’re working on addressing.
JAY Z: As well as having a discovery program, where established artists can take things that they like and just showcase them. It’s all about paying it forward and working very cyclically and discovering new music. Imagine if Win from Arcade Fire puts up an artist that he discovered in Haiti — and he had this idea, actually, I don’t want to step on his idea — and through the curation process gets something really good and introduces it to the world. And then the world is inspired by that sound. It gets a little ethereal from there, but just the possibilities of what Tidal can do are really exciting, on a creative front.
How is Tidal’s payout structure for artists different from competitors such as Spotify?
JAY Z: I know everyone thinks “new company, main business competitor is Spotify” but we’re really not here to compete with anyone, we’re actually here to improve the landscape. If just the presence of Tidal causes other companies to have better pay structure, or to pay more attention to it moving forward, then we’ve been successful in one way. So we don’t really view them as competitors. As the tide rises, all the boats rise.
SCHLOGEL: The royalty rates will be higher than other services. In addition to that, there won’t be that free tier that’s been depressing the recorded music industry, and frankly been a part of what’s been driving the downfall of the recorded music industry, is that free consumption. Music is not free, fundamentally. Someone came in and produced that beat, someone came in and sang that song, someone wrote that song. Someone came in to clean the studio afterwards. There is an entire ecosystem around this, and we’ve somehow come to believe that it’s okay to pay hundreds for consumer electronics but to pay nothing for the music that helps sell it. It’s around the education process, with that there will higher royalties. And then another point that I want to touch on that’s really important philosophically, not just from a dollars and cents perspective, is the equity ownership. All artists who come in — and this is an open platform, an open invitation — will participate in the equity upside. And that is important, too, because of that participation in the process, by having a board seat, by actually being an owner in this. It’s a different type of involvement.
Will “exclusive content” be available for purchase anywhere?
JAY Z: I don’t know. It’s available for streaming immediately. I don’t know where streaming will go in the future. The analytics that we’re seeing tell us that streaming is the next thing, and downloads are going down. I feel like with the history of this platform, from vinyl to where we are now, it just seems like the next logical step. Before you had a CD, you put it in, you had the download, they eliminated the CD so just downloads. Now you’re going to eliminate the download and you just play it. So it just seems like the next logical step in what’s going to happen.
So you don’t think there will probably be much of a need?
JAY Z: Not from the analytics that we’re seeing. It seems like downloads have gone down.
What exactly were the contents of the document that was signed during the press conference?
JAY Z: Just a declaration that we’re going to work really hard to improve what’s going on in the pay system as we know it. You guys may have seen some of the stats like, Aloe Blacc had a song that was streamed 168 million times and he got paid $4,000. For us, it’s not us standing here saying we’re poor musicians. If you provide a service, you should be compensated for it. And not just artists — just think about the writers and the producers. Like an artist can go do a Pepsi deal or something — I shouldn’t have singled out Pepsi — but they can go get an endorsement deal somewhere and you know, go on tour and sustain themselves, it helps their lifestyle. But what about the writers who do that for a living? The producers? That’s it for them. What about Jahlil Beats, who produced Bobby Shmurda’s “Hot N**ga”? He went on to get a $2 million record deal or whatever, and Jahlil Beats just put the song out. So he wasn’t compensated for that song at all. There are dozens — more than dozens, there are thousands and thousands of those sorts of stories of someone who worked at their craft, worked really hard at the studio, they did their job and people loved it and consumed it and they just went home. I think we’ll lose a lot of great writers in the future because you have to do something else, because you can’t sustain a lifestyle, and I think that’s a shame. That someone has that talent and just isn’t being compensated because someone needed a business to profit off of their work. And we’ve seen that time and time again, we’ve seen it time and time again. Companies that pretend to care about music and really care about other things — whether it be hardware, whether it be advertising — and now they look at music as a loss leader. And we know music isn’t a loss leader, music is an important part of our lives.
As musicians, we’re taught to value the quality of high fidelity music, and we’re most likely willing to spend extra. While we may be in the minority, the general public is more than content with purchasing or streaming mp3 files at little to no cost. What demographic is Tidal targeting with the charge of $20/month for high-fidelity music? How will the option of high-fidelity attract listeners who aren’t in that minority?
SCHLOGEL: First off, there are two tiers. There’s your $9.99 tier and there’s your $19.99 high-fidelity tier. Interestingly, there are a lot of folks who do care about that — I mean, what’s also interesting is the people who, maybe not all music students, but they’ll pay $10,000 to kit out their house with speakers and then put compressed files through those speakers. Which blows my mind, because I’m like “hmm.” There is that audiophile group, who do care very deeply about it and that high-quality tier matters a lot to them. It also matters a lot to the artists, not just Jay but, sitting in the room with the other artists that are behind Tidal… I didn’t even fully appreciate coming into this how important that sound quality was. So many artists were just like “Man, I really want to communicate that song that way,” and it’s important to them to have that option there for people who want to hear it like that.
JAY Z: We believe that if you consume music for free, and that’s what you want to do, that’s your choice. There are good and bad parts of a democratic society — do what you like to do. I’m just talking to people who care about musicians and the music they consume. That’s who we’re speaking to. There was a time when I walked into a mastering session and we’d finally gotten Kanye to get on a plane, because he was at the end of his album, and there were 70 mixes of “Stronger” and “Good Life.” Seventy. So imagine a person goes through 70 mixes just to get something right, the way they believe is right, in their mind, and you just put into a compressed file and you just send it out. Some people really care about, and are really passionate about their music and want it to be heard the way it was intended. It’s not for everybody, and we’re not trying to force it on you but if that’s what you like and that’s what you really care about, then you have the option. And that’s what Tidal is saying.
Will artists who aren’t in the top tier of the music market, who aren’t expected to sell as much, have a higher chance of having virtually no equity?
SCHLOGEL: I’m going to go into Finance 101 for just a second. So, there are two ways to look at this, which is a nominal percentage amount — the size of your slice of pizza, and the slice of the pizza overall. So if you’re gonna have x% of a tiny pizza — I could set up my little company here and own 100% of it, and that number sounds fantastic, but it’s 100% of this little thing that is meaningless. My only point of saying all this is, as we grow along to become a bigger company, realistically, of course, we can’t give out the same percentage to everybody, but by time the size of the pizza is growing and everybody’s sharing in that upside. I didn’t mean to nerd out there, but there’s always some negativity around “Oh but that person got this, this person got that,” it’s not like that. We really just want artists to share in the upside as the pizza grows.
JAY Z: Yes.
What changes do you see coming to streaming in general, and how does Tidal plan to react to those changes in a competitive environment, with everybody fighting for number one?
JAY Z: We’re cool with, you know, they can be McDonald’s, we’ll be Shake Shack. We don’t have to be number one, we just want to be very specific and very great at what we do. We want to do a very specific thing, we want people to come to Tidal for a specific sound, a specific experience, and to know that there are going to be the greatest new artists in the world, the biggest artists, introducing the newest artists, collaborations and things you’ve never seen before. That’s what we’re going to do. After that, the world decides. The universe decides.
Do you think there will ultimately only be one service that everyone uses?
JAY Z: The universe needs balance. There’s light and dark, there’s day and night. There’s young and old. There’s always an alternative in life. So I don’t believe there will be one service.
As a company where do you see Tidal in 1 year, 3 years, 10 years?
SCHLOGEL: It’s a great question, and it’s like the other question that asked “How are you going to react to this and that?” And immediately my thought was, “We don’t want to react! We want to create!” Right? And I’ve said this over and over again so Jay is probably tired of hearing it but, the entire global streaming market, the number of paid subscribers, is less than Netflix alone. So it’s not even like we’re entering some sort of established market — no, we’re creating as we go along. And that to me is what’s really interesting, that’s why I’m personally drawn to this as a life project. We’re going to make it what we want it to be, and the artists will make it what we want it to be. And frankly, one huge definition of success — and Jay alluded to this earlier —is if the tide rises for everyone. Right now, the way that things are trending, if they keep trending at this level — we’re not in a sustainable situation, are we? I mean, we keep having this conversation. Someone asked me the other day, “Well, isn’t free streaming better than piracy?” And I responded “In any other industry, are you having the conversation around ‘Yeah, but, if they’re gonna steal anyways shouldn’t you be giving it to them for free?’ Would you have that in the auto industry, the fashion industry, the tech industry? No! You don’t just give it away for free because people might steal it! That just means you need to change the conversation. We want to grow the market, we want to allow the content creators to have better control over the distribution of the art, and we want the tides to rise with everybody.
JAY Z: And I think I should get an iPhone with my Lauryn Hill album. Not the other way around.
Is TuneCore going to be involved in any way? Will you be able to put your music on Tidal through TuneCore the way you can do with other services?
SCHLOGEL: This goes back to the fundamental question earlier of “Is it easy for indie artists to upload their music to the system, to inject it?” These are all initiatives that we’re working on and we’ll figure out the exact steps of how that’s going to be done.
Tidal is a streaming service created by artists. Is it necessarily for artists? Does this streaming service exclude the major labels in any way?
JAY Z: Well, we can’t exclude the major labels because they have contracts with the artists. But if you don’t have a contract as an independent artist, they you can do whatever you want and we would love to work with you.
Does that mean that artists that are currently on Tidal, when their contracts expire, could have the option of going in lieu of a record company, and work with something like Tidal?
JAY Z: I’m on Tidal. I don’t have a record deal. So… yes.
Does that make you a label, then, in a way, as well?
JAY Z: Don’t disrespect us, man. We have bigger ambitions than that.
How do you think Tidal will influence or elevate hip-hop culture?
JAY Z: I believe that once Tidal is known — we’re not known, because it’s been three days — once we’re known as a destination for really good music, really good sound, and you expect a certain quality from us, people won’t come just to hear. It becomes a destination — “Let me check this out” — just so an artist won’t necessarily have to have the club single, the girl single, to be catchy to be heard. We built a place, a home for creativity where people can have songs that are 18 minutes long with no hook and we’ll hear songs like “Like A Rolling Stone” again, where there’s no clear, definable hook but it’s still considered one of the greatest songs of all time. Once we’ve established that, I think art and music can flourish on their own terms. You don’t have to record into this vacuum —- and again, this is not about against-ness, this about doing something great — and try to get onto a particular station that has a particular sound. I think that that’s kinda divisive to music. That’s not how music is created or consumed — people listen to music because of some sort of truth, some sort of emotion, some sort of great melody. And I think that separation happened at radio mainly because of advertising. It had nothing to do with music. “I have the 18-24 year olds here. You want to play this song at this time, 100 times a week, because everyone’s tuned in.” That has nothing to do with music and everything to do with advertising and something else. I think the idea of putting the music in front once again is what TIDAL is about. Putting the artists in front. The artists own the company — you’re cool with that right? This is a really bad example but: if Michael Jordan said to me, “Hey man! I got some new, great sneakers that nobody’s ever seen. You wanna buy ’em from me? Foot Locker’s out of business.” I’m gonna go straight to Michael Jordan’s house and buy the sneakers from him. It’s not a problem — that’s what I want to do. Buy your music from artists and have a better relationship. We’re going to offer more, we’re going to talk to you, we’re going to find out what you like and introduce you to new music. Putting the artists back in front, instead of “You get the music if you buy a device, you get the music if you download an app.” The devaluing of music is critical — we all love music.
How does Tidal tend to shift its current perception as a pretentious, self-serving platform for the musical elite, to one referencing the brand essence of being all and for all artists?
JAY Z: I guess by having a conversation, and telling people what it is. That opinion came before we even explained what it was — “This thing is horrible! … What is it?” You know? You never hear Tim Cook’s net worth whenever he tries to sell you something. Steve Jobs, God bless, he had to have been pretty rich — nobody’s ever said, “Oh, the rich getting richer! I won’t buy an iPhone!” Yeah, right. It’s not about being pretentious; again, this is a thing for all artists. You pay $9.99 for Spotify, so why not $9.99 for Tidal. We’re not asking for anything else, we’re just saying that we’ll spread that money to artists more fairly. We’re not saying anything other than that, and we’re saying that we’re in a position to bring light to this issue. We’re using our power that way. And of course there are greater causes, of course. This is not mutually exclusive — there are other problems, real problems going on in the world. We don’t miss the problems; we try to take care of them all. Imagine the President: he has to take care of ISIS, gay rights, equal pay for women, discrimination — all at the same time! So, you can’t say “You started this site when you should be out in St. Louis!” It’s like, okay, J. Cole is out in St. Louis. I wasn’t in St. Louis, but I was in the governor’s office. Because, we can march all day long but if the laws don’t change, then we’ll be marching again and it’ll just be a different slogan on the shirt, and that’s a greater tragedy as well. Everyone has to play their part, everyone has to do different things, and it all has to happen at the same time.
Do you think this can have a systematic effect?
JAY Z: Of course. Absolutely.
Are you concerned that having content exclusive to Tidal will rekindle consumer piracy, considering that existing streaming consumers may be accustomed to a free standard, or are already paying and don’t want to double down on fees?
JAY Z: People that are fans of “free” are no fans of music, right? Hopefully people see the value in what we’re doing. But if not, that’s what you do. You get free music.
If it’s on Tidal and somebody has a subscription to Spotify, they faced with a choice, right? Either get both or not have access to any exclusive content.
JAY Z: At some point they’ll be faced with that decision. Again — there will be other things. This isn’t just about music; it’s also about concert ticketing. It’s a holistic place where the artists will live in. You may be able to download a song for free, but you’re not getting into concerts for free. There are different things that we offer. It’s not just songs — we’re offering value.
At this point the questions transitioned from pre-vetted student questions to audience questions.
What do you hope that Tidal will do for the younger generation that other services have not?
JAY Z: I guess the most ethereal answer is just to improve the quality of life, to improve the level of art. I think it’s important to build up music again, and it’s an important part of peoples’ lives. It’ll enrich your life in some way.
Do you think you can reverse the trend of peoples’ valuation of music?
JAY Z: Absolutely. If a person can pay $6 for a bottle of water, something that used to be free, if someone can do that? I can definitely show you why you should pay for Lauryn Hill’s album. There are 14 reasons, it’s incredible. Someone’s changed our mindset to believe that that bottle of water is worth $6.
How do you take into account the devices and headphones that people are listening to high fidelity audio on? If I have a pair of $10 headphones, how would that compare? Do you guys maybe see a partnership with a headphone company in the future?
JAY Z: We’re exploring those opportunities as well. And I think that if you have a $10 pair of headphones, you should probably buy the $9.99 plan. And if you’re like Vania’s artist friends and you deck your whole house out with hi-fi, then you probably want the hi-fi plan. But we’re definitely looking at opportunities; we have like four people looking at three or four headphone companies.
Some artists have equity stakes in the company — is it possible for independent artists to get equity in the company? How is that determined?
SCHLOGEL: Absolutely. We’ve set up a stock appreciation rights program already — it’s nascent, but it’s in place. And as we go along, we’re working with the artist founders and figuring out how exactly to grow and evolve it going forward, and figuring out how we will set up this program and send out that messaging, especially to independent artists.
Tidal is making a strong effort to bring the value of music back into the forefront of the discussion. How far is the company willing to go to convey that message?
JAY Z: Our whole thing is transparency — I think there does need to be transparency. If you went to Bordeaux or something, to look at wine, you’d probably think, “Oh, this is some bougie shit.” But if you went and you saw the craftsmanship, the work that went behind it, and someone’s gotta be picking the grapes, and the whole thing — if you saw the process of what it takes to make an album, maybe you’d have a great appreciation for it as well. So I just think that there needs to be a bit more transparency. I’ve got another great idea that I wish I could share with you all about that sort of thing in particular, and it’ll be coming soon, in the next couple of months, and hopefully it’ll be exactly what you want.