It’s hard to make money in streaming music, unless you are a rapper.
Dr. Dre, who may or may not be hip hop’s first billionaire, undoubtedly made a lot of money when Beats, the streaming music and headphones company he co-founded, was sold to Apple for $3 billion last year.
Perhaps motivated by this windfall, another business-minded rapper, Jay Z, is looking to follow suit. Last month, the man otherwise known as Beyonce’s husband agreed to acquire Aspiro, the Scandinavian parent company of Tidal, a music company focused on hi-fi audio that we wrote about earlier this year, for $56 million.
Aspiro and Tidal’s CEO, Andy Chen, argued to Quartz earlier this year that we are approaching a tipping point for music quality. Consumers are flocking to streaming music services using inferior quality sound, but also spending money on premium headphones and vinyl, at least in part to attain better sound. “For some reason music is the only format where people accept something worse than before,” Chen said.
Evidently Jay Z agrees. But his takeover of Aspiro hit a hurdle overnight when minority shareholders, who own about 10% of the company, rejected the bid, according to the Swedish press (via Rolling Stone). Some shareholders have been opposed to the deal because Jay Z’s investment vehicle, Project Panther, hasn’t detailed the calculations behind its offer or its plans to take the service global, Billboard reported.
Aspiro said it was unable to comment due to stock exchange rules and a spokesperson for Jay Z did not immediately respond to inquiries from Quartz. The bid process is expected to conclude in about a week, by which time Jay Z, considered a model entrepreneur, will need to turn things around.
That’s not out of reach for a canny dealmaker like Jay Z, who flipped a stake in the Brooklyn Nets in 2013, and according to Forbes, made a Warren Buffet-like return in the process. Still, streaming music is a difficult business because of the high royalty costs and fierce competition from players like Apple and Google, which are more interested in streaming to cultivate loyalty and sell devices than to turn a profit. Also, Tidal is more expensive—it costs $20 a month, compared to $10 for Spotify.