The tech, telecommunications, and media industries are fusing into one. Today’s installment: Sprint announced that it will buy a 33 percent stake in Tidal, the streaming music service owned by rapper and businessman Jay-Z, in a deal reportedly valued at $200 million.
Sprint also promises its customers will receive “unlimited access to exclusive artist content not available anywhere else.” But it’s not clear yet whether that means Sprint’s 45 million wireless customers will receive free subscriptions to Tidal, or whether the service will be given special treatment on Sprint’s network. “More news on exclusive offers, what this exactly means for current and new Sprint customers and upcoming promotions from Sprint and TIDAL will be unveiled soon,” a Sprint spokeswoman told WIRED.
The deal is hardly as big as AT&T’s proposed $85.4 billion acquisition of Time-Warner or Verizon’s $4.4 billion purchase of AOL or its troubled plan to Yahoo for $4.8 billion. But it stems from the same impulse: telcos want to buy up content companies to hedge against multiple assaults on their traditional business models.
Cord-cutting threatens to undermine their pay television businesses. Tech companies are to building their own internet infrastructure. And as more wireless spectrum becomes available for the emerging 5G standard, new competitors could emerge, or certain incumbents could gain an edge over others. Comcast, for example, has ambitions to get into the wireless market and could eventually crowd out smaller players like Sprint. Meanwhile, the telcos have watched as Amazon, Facebook, and Google have become some of the most valuable companies in the world on the backs of infrastructure controlled by the telcos. So it’s only natural for Sprint and other old school companies to try to buy their way into the new hybrid tech/media industry while searching for ways to distinguish themselves from each other.
So far, that’s largely taking the form of an idea that has long worked for telcos: the bundle. For example, AT&T bought satellite television provider DirecTV in 2014 and launched a new streaming video service last year called DirecTV Now that offers access to live television programming. To sweeten the deal, AT&T offers free unlimited data to its broadband customers who also subscribe to DirecTV, while those who forgo a DirecTV subscription will have to pay an extra to exceed their 300GB data limits. AT&T also exempts data used by the DirecTV Now app from its wireless plan caps. In short, it’s a way to encourage customers who want live television programming to pick DirecTV Now and AT&T over competing services.
Since the Federal Communications Commission’s Republican members, who now have a majority at the agency, have signalled that they hope to roll back at least some of the agency’s net neutrality rules, there’s little to stop Sprint from pursuing a similar strategy with Tidal. The company could, for example, allow Tidal to bypass Sprint’s current audio quality limits for music streaming services on its wireless plans.
While telcos’ impulse to gobble up tech and media companies makes sense, it remains to be seen whether these deals will benefit them in the end. Mega-mergers have a tendency to not work out well (anyone remember Time-Warner’s acquisition of AOL?) Sprint’s investment in Tidal, at least, is lower stakes.
And the partnership could provide a big boost to Tidal. Although the company claimed early last year to have around 3 million paid subscribers, a report published last week by Norwegian newspaper Dagens Næringslivsaid, based on documents provided to record labels, concluded that Tidal only had around 850,000 paid subscribers. Sprint declined to comment on Dagens Næringslivsaid’s report, and Tidal did not respond to a request for comment.
Regardless, Tidal likely has far fewer customers than competing services like Spotify, which claimed 40 million paid subscribers in September, and Apple Music, which boasted 20 million paid subscribers in December. Sprint seems to be banking on the idea that even though Tidal’s exclusive arrangements with Kanye West, Radiohead, and Prince have failed to translate into a spike paid subscriptions, such premiums might be enough to get people to switch to Sprint, or at least not switch to another provider. It may well not work. But you can’t knock the hustle.