Square spends $297m for a majority stake in Jay-Z owned streaming service, Tidal

Trapital’s Dan Runcie breaks down the strategic angle behind Square’s acquisition of Tidal.

LOS ANGELES, CALIFORNIA - JANUARY 25: Jay-Z attends 2020 Roc Nation THE BRUNCH on January 25, 2020 in Los Angeles, California. (Photo by Kevin Mazur/Getty Images for Roc Nation)

Jay-Z is on a roll.

The hip-hop legend recently sold a 50% stake in his champagne brand Armand de Brignac (“Ace of Spades”) to lux giant LVMH for $600m+ (netting him $320m).

And, then yesterday, he sold a majority stake in Tidal — his high-fidelity music streaming platform — to fintech firm Square for $297m.

Jay-Z, who bought Tidal in 2015 for $56m, will get a seat on Square’s board as part of the deal.

Rumors of the deal first started last year

Here’s what we wrote about a potential deal back in December:

At first glance, Square’s 2-pillar businesses — seller services for merchants (e.g., the dongle) and the Cash App for consumers — seem tangentially related to music streaming.

There is a strategic play, though, according to Dan Runcie (author of Trapital, a must-read newsletter on the business of hip-hop).

Here are 2 reasons:

  • Customer acquisition: Adding a content play like Tidal to the fold is comparable to Amazon offering Prime Video. As Jeff Bezos said, “When we win a Golden Globe, it helps us sell more shoes.”

Further, Cash App is already very popular in the hip-hop community, often used for its viral bitcoin/cash giveaways. The app’s cultural relevance gives Cash App the industry’s lowest customer acquisition costs.

  • Give creators seller tools: Tidal already provides a way for creators to make music and podcasts. Square could graft on additional commerce tools, like it does for its existing merchants.One potential road map: SoundCloud, which offers creator tools (e.g., insights, promotional tools, payment splitting) on a subscription basis.

Jay-Z’s net worth is now $1.4B…

… based on estimates from Forbes, including:

  • $95m music catalog
  • $140m Roc Nation (full-service media agency)
  • $150m stake in Tidal
  • $320m stake in Ace of Spades
  • $425m in investments (e.g., Uber, Square, SpaceX, Oatly)

Jay-Z’s secret sauce: sticking to “what you know.”

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