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A Trojan Horse Called Tidal: It's the Strategy That Matters

04/28/2015 06:14 pm ET | Updated Jun 28, 2015

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Barely a month after the launch of Jay Z's Tidal, with major artists lining up to show support and journalists signaling the arrival of a big new digital music gorilla, the tide of opinion seems to have dramatically turned.

The Tidal app has sunk in popularity, a new CEO steps in, and many -- from self-righteous bloggers to opinionated venture capitalists -- have suddenly written it all off. They claim Apple, Spotify, and Pandora are too entrenched, too richly endowed, and far too big to compete with. The argument goes that a pricey premium service like Tidal, backed by rich, naïve artists, just can't catch up to the big horses. Those big horses are willing to step up to expensive record label deals. And they can afford to absorb losses for years as they build large subscriber bases, leaving others in the dust. Some of these competitors might even retaliate against Tidal, withholding promotion for artists who give Tidal exclusives.

Even artists have piled on. They see Tidal as a squandered opportunity, part of the same wave of ornery streaming business models that depressed the value of recorded music for all artists. (Tidal may be worse in their view, given the wealthy artists backing it.)

No matter that we're only a month in, or that Tidal and predecessor Aspiro are actually niche services -- offering high fidelity streaming for a premium fee. Forget about the fact that major labels are now pulling back dramatically on their partners' rights to stream free advertising supported "interactive" music -- a weaker business than Tidal's premium business model.

And while we're at it, also forget that committed digital services with patient backers can find life and profits over time with digital music. Definitely don't mention Rdio or tiny 8tracks to these opinion leaders, either. They're both doing well, punching well above their weight class, lining up carrier deals, building audiences -- one is even profitable.

That's a lot of forgetting and secrets to keep. Here's what everyone seems to be missing:

Tidal's biggest promise was never the service itself, nor is it the idea of slightly higher streaming compensation for artists; rather, it's the emerging artist strategy behind Tidal that could be the biggest game-changer over time.

Tidal is actually just one piece of a broad strategy to empower artists with their own digital platforms, tools, and even the influence of a bigger organization. The idea is to help make a difference for artists over time. Jay himself said it.

If you don't believe this, look no further than Roc Nation, Jay's management company, which not only manages music stars like Rihanna, Shakira, and Haim, but now also has a sports management business, with baseball players to boxers under contract. It's not a perfect scenario, and some relationships haven't worked out. But it is a clear step towards the goal of building a supportive artist-centric enterprise.

Roc Nation's site sells pricey merchandise, and its mobile business is quietly setting the stage for mobile commerce from its artists sites, too. If this strategy were to gain traction, it could be a game-changer. Roc Nation could not only sell merchandise, but they can add tickets and potentially, music, too. They can build a base of customer relationships and a robust D2C business for its clients.

This strategy -- called Direct to Consumer or "D2C" -- used to be a boring afterthought in the recorded music business -- the back office where labels sold box sets and repackaged catalog music.

Today, with music margins shrinking, streaming competition intensifying, and many parties scrambling to mark out space in a disrupted music market, it is a priority for all, labels and artists included. Over time, it could be much more important than album exclusives or short-term content "windows" from warring streaming services, too.

Everyone in the music ecosystem needs a D2C strategy as they revaluate and reinvent -- and a major manager like RocNation, Tidal included, is in a strong position to build out this strategy.

It is not clear how close the relationship is between the new Tidal team and the RocNation team, but this family of interests definitely looks potent. No doubt that Tidal's execution is important -- poor execution helps no one -- but the smart strategy behind this broader enterprise could be a game changer.