Hi Fi Streams

Jay-Z has just launched a successful bid of $56 million to acquire Aspiro, a Swedish streaming company belonging to the larger Norwegian media conglomerate Schibsted. Its shareholders have voted and given their unanimous approval, so the operation is all but final. The transaction gives ownership to Jay-Z of two big and important streaming businesses, Tidal and WiMP.

Jay-Z strong interest in high fidelity audio and streaming is apparent from the purchase of Tidal, the new service that is built on WiMP’s platform and offers high definition FLAC files. WiMP offers a catalog of roughly 25 million songs and more than 75,000 music videos to its 580,000 paying subscribers in Norway, Sweden, Denmark, Germany and Poland.

FLAC stands for Free Lossless Audio Codec, and is a better resolution format for audio than the mp3 files that Spotify uses and which move only 320Kbps. FLAC offers more than five times that and trumps every other streaming service out there¹. FLAC’s “lossless” quality eliminates data removal and compression, but files are larger. Tidal says that users will be able to stream CD quality audio “ the way it was intended by the artists ”².

This is significant because there is a large listening audience that is already invested in superior quality audio systems capable of reproducing FLAC files. That audience will have either high-end speakers and high-end headphones, or both. Spending on high-end headphones is up 65%, while home audio systems that stream audio have grown four times since 2012³. CD quality streaming is currently being denied to this ever-growing audiophile group. Streaming itself has been steadily rising in popularity over the last few years, and by as much as 55% in 2013⁴. As streaming replaces declining physical sales, the listening community at large may be the larger market for the new codec.

What Stream?

Still, music streaming is becoming a crowded market. Spotify is on top, but there is also Rdio, Beats Music, YouTube’s Music Key, Pandora, and PlayStation Music too. Moreover, Tidal is not the only player in the high fidelity lossless arena. Deezer recently brought its Elite service to the US. Like Tidal, Deezer Elite offers 16-bit FLAC streaming. Though for now Deezer Elite is only compatible with Sonos speakers, it will likely become more widely available soon.

Tidal will also face competition from Neil Young’s PonoPlayer. The small iPod-like device offers “better than CD quality” audio files in the form of 24-bit FLAC files. But PonoPlayer only supports music from its PonoMusic Web store, which functions similarly to the iTunes store, so no streaming of any kind will be available through it.

Even then, Pono’s remarkable startup success with a Kickstarter crowdfunding campaign should provide food for thought among streaming services. Pono was funded to the tune of $6.2 million, even though the initial goal was $800K. It involved a total of eighteen thousand backers—a clear proof of concept for interest in higher quality audio. Moreover, while Jay-Z enjoys the support of a younger demographic, and Tidal streams users are likely to be first adopters among the consumer digerati, Neil Young is likely to appeal to older age groups with more discretionary income to spend on high fidelity systems. Either way, the dye is being cast already for a higher end listening experience.

Getting There

Currently, Deezer Elite and Tidal are the only major players in the high quality streaming market. Although high quality streaming fudges the comparison, they will have a way to go before reaching Spotify’s level of success.

In the overall streaming market, Spotify has at least 3 million US subscribers, and Deezer and Tidal still pale by comparison. Deezer has recently signed up 200K subscribers in the US and the service is only available on Sonos speakers. The company has no plans to roll out Elite on mobile any time in the near future. Tidal has even less users (only 35K globally), but with Jay-z’s clout and cash, down the line the possibility exists of giving Deezer, at least, a run for its money. Tidal intends expansion in twenty-two countries and in all likelihood will consider a mobile quickstart.

A subscription with Tidal currently costs $20/month and Deezer’s is only $9.99/month if paid in full for a year, or $14.99 if billed monthly. Neither service currently offers any sort of free tier, but Tidal offers a seven-day trial to allow potential customers to test drive the service. This is necessary to build product awareness.

Closing thoughts

High fidelity streaming will undoubtedly have a future in the music marketplace. With the upward trend in spending on high-end audio equipment, consumers beyond the audiophile community may make the conversion to high quality audio. There is a precedent. The warmth of old LPs and their better dynamic range was reappraised after the CD revolution took over, generating a specialized demand for vinyl and high-end turntables.

Streaming may be going the same way. There are some technical problems that need to be addressed by streaming companies before the technology can be widely adopted. The large files take time to buffer before the song can begin to play, and, if sideloaded to a device, they require a large block of memory, and can quickly drain a battery. Streaming these large files will also consume large amounts of data on a cellular plan, so users of a mobile service would likely only listen when they have a Wi-Fi connection.

Additionally, the high cost of the infrastructure required to stream large numbers of FLAC files contributes to a premium price for the service, which, in a market where many streaming services have free options and low-cost premium services, can be a turn off for many consumers.

Lastly, the design of Tidal is a bit clunky and difficult to use, particularly when compared to Spotify, Beats Music, and Rdio. In the end, the boost to the high fidelity streaming industry could come from well-established services like Spotify rolling out a high fidelity option, perhaps as a new subscription tier. Given a substantial user base, economies of scale could make the service cheaper. Until then, these services are worth looking into. If you have lamented the decline of audio quality, or have yet to experience high quality audio on streams, you may be surprised.

By John Lahr

1. http://www.theverge.com/2014/10/28/7080697/tidal-brings-high-quality-audio-streaming-to-everyone-for-a-price

2. http://www.npr.org/blogs/thetwo-way/2015/02/02/383362928/jay-z-close-to-entering-streaming-music-business

3. http://gorave.com/consumer-households-spending-over-1600-annually/

4. http://www.npr.org/blogs/thetwo-way/2015/02/02/383362928/jay-z-close-to-entering-streaming-music-business

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