Market Insight

Sprint joins crowded US music market with 33% stake in Tidal

January 24, 2017

Jack Kent Jack Kent Director, Operators & Mobile Media
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Softbank-owned US mobile operator Sprint has acquired a 33% in on-demand music service Tidal. Financial details have not been disclosed.

  • As part of the deal, Sprint’s CEO will join Tidal’s board and the operator plans to bring exclusive Tidal content and offers to Sprint’s mobile customers. Neither party has released details on what content or access will be offered to Sprint subscribers.
  • Sprint claims a total of 45m US retail prepaid and contract mobile customers, placing it fourth behind market leaders AT&T, Verizon and T-Mobile.

Our analysis
 

The US has lagged behind other markets for operator music deals

Bundling premium access to subscription on-demand music services has been a much used tactic by mobile operators outside the US. Orange first partnered with music service Deezer in 2010 and Nordic operator Telia’s relationship with Spotify in Sweden dates back to 2009. Tidal’s previous incarnation Wimp Music, under its former owner Aspiro, was positioned as an operator centric service with multiple partners in Europe.

US operators including Sprint have agreed partnerships with music services, but these have generally been limited to deals that preinstall apps on certain devices, offer limited trial periods or discounted plans – rather than the full bundled access favoured in Europe and elsewhere.

Like Sprint, European operators have also invested in music services as part of these deals: Orange originally took a stake in Deezer in 2010 and participated in a further funding round in 2016; Telia invested $115m in Spotify in 2015; Telefonica invested in Rhapsody-Napster as part of a 2013 deal through which it provided bundled and discounted music access to its mobile customers.

 

Profitability is still a challenge for many music services

Operator investments in music services have helped create beneficial partnerships, but also point to the challenges for many in the on-demand music business. The aim is often still to acquire users rather than achieve profitability in the short term and so services remain reliant on investors’ funds.

Standalone music services like Spotify, Deezer, and Tidal also face a challenge compared with services from Amazon, Apple and Google which may not need to achieve profitability provided they support the wider platform strategies of their owners e.g. device sales for Apple, Amazon’s retail activities and Google’s advertising business.

Neither Sprint nor Tidal has disclosed details on the type of content or level of access that will be offered to Sprint mobile subscribers. A deal that includes bundled access to Tidal for Sprint customers will give Tidal a boost in subscribers and profile in the increasingly competitive US music market. Almost half of Apple Music’s 20m subscribers at the end of 2016 came from the US. Global market leader Spotify passed 40m paying customers in September 2016. New entrants to the US premium on-demand music market include services from iHeartRadio and Pandora.

US operators continue mobile content and service innovation

US mobile operators have been among the most innovative in recent years when using content and services to attract and retain customers. But most have opted not to follow the bundled service partnership route. Verizon’s main push has been its go90 mobile video service - supported by a number of advertising technology related acquisitions; T-Mobile’s disruptive “Un-carrier” marketing strategy has helped it gain market share by focusing on zero-rating data for a range of content services rather than bundled access. In an indication of how crowded the music streaming market has become, T-Mobile now includes around 40 different services under the free to stream program, though many of them follow radio streaming format. AT&T’s activities include sponsored data and its new DirectTV powered mobile video strategy. AT&T is also moving to acquire media giant Time Warner in a $109 billion deal that would further ramp up its content driven strategy, though since Time Warner disposed of the Warner Music Group in 2011 that would not prove much benefit for any music streaming strategy. AT&T has previously pushed a free music subscription service in partnership with Beats Music, though after starting in January 2014 that ended in October 2014. While AT&T hosts the like of REVOLT TV, IHeart Media and Pandora on the U-Verse service, it has not created any high profile music streaming partnerships targeting the wireless business since.  

Tidal needs more than the Sprint deal to secure its position

In a competitive music streaming market this deal will provide vital support for Tidal which re-launched in March 2015 as an ‘artist owned’ platform to mixed reactions to the all-star support it enjoyed. Sprint was the first carrier partner announced at the re-launch and while supporting the business in the short term, it will likely need further initiatives to grow its international business given Sprint’s US focus.

 

 

Geography
USA
Organization
Sprint
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