Jay Z's Tidal Gets New CEO Again

Eight months after launching Tidal, rap mogul Jay Z already hired the fledgling music service's third chief executive.

The company said Jeff Toig—the former chief financial officer of SoundCloud, a Berlin-based audio-sharing service—would take over as Tidal's CEO in January.

His arrival caps off a hectic year for Tidal, which charges $20 a month for a high-fidelity version of its 40 million song catalog and the standard $10 a month for download-quality sound. Those two tiers originally operated under different brands run by Swedish company Aspiro, which Jay Z bought in March for $56 million and relaunched as Tidal in April.

He has given 19 famous artists and bands, including Kanye West and Madonna, small stakes in Tidal and promised each millions of dollars worth of marketing, according to people familiar with the matter.

Since then the service has offered exclusive content from Prince, rapper Lil Wayne and others, while developing a roster of emerging artists and amassing more than 1 million subscribers, according to a recent tweet from Jay Z—double the size of Aspiro's subscriber base before his acquisition.

But without an experienced leader, many industry executives said they were skeptical that Tidal could compete against Spotify AB, which counts 22 million subscribers paying $10 a month and nearly 80 million free users, according to people familiar with the matter. Not to mention Apple Inc.'s Apple Music, which launched in June and claims more than 6.5 million subscribers.

Jay Z's team dismissed Aspiro's CEO, Andy Chen, in April shortly after the relaunch, appointing another Aspiro executive, Peter Tonstad, to serve as chief on an interim basis. Mr. Tonstad left the company in June.

As Tidal searched for a permanent leader, it also held exploratory talks with a variety of other streaming services about a possible merger, according to people familiar with the matter. No deal has materialized.

One concern among potential partners, according to one of these people: Tidal spends more, relative to its size, on royalties than its larger rival, Spotify, leaving less money available for marketing via TV ads. Tidal devotes 75% of its revenue to paying labels, artists, publishers and songwriters, Jay Z tweeted in April, whereas Spotify says it pays 70%.

Turning a profit on music subscriptions alone has proven difficult. Apple may be able to afford not to do so, since it makes so much money on hardware. Company founder Steve Jobs famously said that the company could treat iTunes music download sales as a loss leader for that reason.

But Spotify is preparing to launch an array of non-music video content next year to bring in fresh advertising dollars. Alphabet Inc.'s Google, which launched its video subscription service YouTube Red in October, reaps most of its revenue from advertising on its free services.

Mr. Toig, who earlier in his career co-founded a music-streaming service called Muve Music, which was bundled with the subscription plans of 2.5 million Cricket Wireless customers, said he believed that he could build Tidal into a healthy, stand-alone subscription music service. Mr. Toig said he wasn't sure how many subscribers he would aim to acquire over the next year.

His strategy includes managing costs and taking a different approach than his bigger competitors, expanding on some of the approaches Tidal has already started experimenting with. Those include promoting Tidal concerts, offering exclusive live-streamed shows and giving subscribers the chance to meet artists. Coldplay live-streamed songs from its new album exclusively on Tidal last month while Rihanna brought 80 Tidal subscribers to her video-premiere party this summer and gave all Tidal subscribers pre-sale access to her coming tour.

In October, Jay Z staged a "Tidal X" benefit show at Brooklyn's Barclays Center featuring performances by Beyoncé , Nicki Minaj and J. Cole among others, the first of what Jay Z said would be many such charity events to come. Tidal is aiming to breed loyalty among up-and-coming artists by putting them on stage at these shows.

Write to Hannah Karp at [e-mail]

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(END) Dow Jones Newswires

December 02, 2015 00:55 ET (05:55 GMT)

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