Jay Z has reportedly completed his acquisition of Aspiro, the company behind the Tidal and WiMP streaming sites known for offering lossless music and curated playlists.
We talked to Aspiro CEO Andy Chen about the rise of Tidal, the company’s big new streaming site, as well as the future of music.
We started off by asking what it’s been like for Chen to join Aspiro as its CEO, since it’s so different to what he has done before:
I think that was one of the main things that attracted me to the business. My background is much more heavily on the media side, digital media specifically. Both on the agency side as well as publisher side when I was running Viacom Digital International in Europe. And then previous to this I was briefly on the venture capital side before getting assigned to run a video streaming software company, which was acquired in 2013.
Now, I think the biggest difference is that in music there are a lot of legacy structures. The business is very established, which also means there is obviously there are a lot of things at risk. So to play in this game you have to respect the rules, and these rules are not that difficult, the rules are you have the music labels, you have the various different artists, the rights collection agencies, and they’re major partners which really dictates a lot of the economics of the business. So as long as you respect the rules, and I do think that there are a lot of rules, legacy business rules in music, but you can definitely find ways to innovate and disrupt as we have done in our own ways.
How does Tidal deal with artists who don’t want their music on streaming services?
I don’t necessarily think it’s only our job to, let’s call it ‘educate the industry,’ and also educate all the artists. I think artists, they are artists, and many of them are very successful businessmen, they are very entitled to their own opinion. Overall, subscription and legal subscription-based music streaming, we’re still far from being mature. The whole industry is still relatively young and as we have proved, Tidal really, I don’t want to say came out of nowhere because it’s really the newer, modern version of WiMP and the knowledge we have accumulated in running a streaming music service in Northern Europe.
We created Tidal only six months ago, and if anything, what we have proved is that people are still in the process of adopting streaming music and people are still in the middle of transitioning themselves from whether you have physical sales or iTunes downloads to now, a popular Silicon Valley term would be the shared economy. You have a subscription to something and then you just access it. And if you can access it on demand then do you really need to own it? Not really. I do very much believe that the industry is still changing and nothing is set in stone. There’s plenty of opportunity and there’s a lot of growth to be had in the coming years.
Streaming dominates the music industry in Scandinavia. How is Aspiro helping further that trend?
There are a couple of things we were doing. First of all, let’s back up a bit and say that we launched High Fidelity for WiMP [Aspiro’s first lossless music streaming product] in Q4 2013. At that time, and that seems like years ago, but it wasn’t that long ago, it was just over a year ago. And at that time a lot of people thought we were crazy to try and launch a service that’s more focused on quality and we’re charging people twice as much as the standard music service.
The way we looked at it was that yes, that might seem counter-intuitive when people perceived that streaming music was going to be a commodity war when prices keep going down and down, when the price goes down then you’re really competing on the commodity service, which I think nobody really wins in that equation. The labels don’t like it, because it’s supposed to be one of the future big revenue streams for them. Going down the commodity price war does not benefit any of the streaming music peers. The margin is already thin, and everybody knows that, and so if you go more and more then you turn into a cable war or a mobile phone carrier war. I don’t think that was the intention.
One of the biggest opportunities in what we’re doing with the global expansion plan was tapping into global consumer trends that are beyond music. This has more to do with consumer trends and also consumer behaviours, which is that in any given population, in any given consumer segment, whether it’s fashion or cars or anything you look at, there’s always different categories of products and services that cater to a different part of the population. What I’m basically saying is that there’s going to be 15-20% of the people in any given population that they are just more quality focused. They want to have the better things, they want to enjoy the better things, they want to get the most of what they can get, rather than settling for what is the cheapest that they can get. That consumer logic doesn’t change whether you’re talking about clothes, auto and all the familiar categories that we have.
When we’re looking at music, first of all everybody knows that the music quality compared to ten years ago at the MP3 level is substantially less than what it used to be ten years ago. Yet somehow in the last ten years or so, due to lack of infrastructure development, which has a lot of macro elements, perhaps people have got used to the fact that MP3 should just be the standard. But music is the only entertainment format in which people have accepted less quality than before. If you look at a parallel universe, which is video, five years ago when you’re buying a TV you may have to decide and say ok, should I get HD-ready TV or should I just go with the normal TV? Fast-forward in five years time and even the smallest monitors today are HD-ready, which means that once people adopt a higher quality base experience, it’s very very rare that people go back and just accept it and say ‘you know what, I would rather watch the granulated pictures.’ Nobody does that.
Once the hardware adopts and chooses higher quality, in the case of video, pretty much what you have is a proliferation of content service providers that are delivering to these hardware manufacturers. Long story short on that point is that when you look at the hardware growth of the sector, it’s a good indication of the growing demands and expectations that consumers have on what’s to come. Now, when we looked at Hi-Fi, we didn’t just go into Hi-Fi and say ‘oh yeah, let’s try to sell twice as much and give them four times the quality,’ what we said was ‘let’s look at the global trends.’
The hardware sector, which is really headphones and also the audio components, both segments have been growing 80%+ year on year for the last four/five years. Especially with headphones, that category has been growing really, really fast. Five years ago everybody was wearing the free earbuds that you get from Apple, the iconic white ones, but these days everybody has got sophisticated, better-quality headphones that cost anything from €200 and upwards to maybe €2,000.
If you look at the audio components side, let’s take a mass consumer brand which is getting a lot of attention, which is Sonos. If you look at the growth of Sonos, and Sonos really is a brand that exemplifies mass, affordable hi-fi wireless system, so it’s a higher-quality system but it’s very affordable on the mass scale. For €200 you can get in on the high quality, the hi-fi components product side. Sonos has been growing enormously, and so have many others. They have all been growing, so we came to the conclusion that people are spending and investing all this money into their hardware, where there’s headphones or speakers, why is it that somehow people have accepted that MP3 quality is OK? And look on the reverse, that maybe it was never OK, it’s just that somehow people accepted it as the standard and accepted the standard which maybe is fine to ask the question. Is an MP3 simply not good enough? And why are we stuck on MP3? Why couldn’t we deliver better quality across all the consumer products and consumer trends and behaviours that people will pay for quality. People will pay for something they find that is unique, and that brings the convenience in a very quality-based experience.
A big part of Tidal is the original content and curated playlists there. How does Aspiro create that?
That’s actually one of our key USPs [Unique Selling Points] in the service. The legacy really comes from WiMP, which has always been known amongst music-lovers as the guys from the record shop. The guys that used to go into record shops, and then you say ‘I like this, but can you make some recommendations?’ Many, many moons ago I used to be a DJ myself and one of the terms that DJs use when you go record-shopping is ‘crate-digging’ so you dig through all the crates and you spend hours listening and you ask the guys from the record shop for recommendations. That was really a legacy and many of our editors, even until today, they have an enormous amount of appreciation and knowledge of the different genres of music, and the evolution of different genres and artists so the legacy from WiMP has always been that.
If you have a piece of algorithm, you can pretty much make recommendations based on patterns, that’s what algorithms do. But that does not necessarily bring out a very human importance in the discovery, which is serendipity, and taste. Algorithms don’t give you someone, it doesn’t provide you with an expert’s taste. An algorithm only provides you with patterns and recommendations based on patterns and what’s trending. It doesn’t give you that personal, personal touch. That is one thing that can never be replaced which is the human touch and the human curation aspect. People have been asking us ‘Oh, look at what Apple is doing now, hiring very, very high-profile people like Zane Lowe.’ We say ‘Great!’ Some of the articles that are floating around already gave us more credit.
If you ask a lot of the old WiMP fans, which is the same feedback that we get on Tidal: People feel that with our services, they’re not just getting a music streaming service, it’s actually something more like a music magazine with not just tailored playlists, but it’s actually editorial because we write articles. For journalists, I’m preaching to the choir here, because that is where the taste and the influence and one of the things we talk a lot about internally is serendipity. Just sampling upon something that actually was someone else’s favourite instead of the top 100, which is what a lot of services do. A lot of our competitors, things trend very quickly because when something is big it gets bigger. But you end up listening to the top 100 of everything because by definition, the top 100 is the top 100 because they’re the most popular 100. We really try to help people discover beyond that. That’s been a very philosophical approach that I think was very critical in our business expansion and also how we differentiate ourselves.
Apple is developing a new streaming service that’s going to be doing many similar things to Tidal and WiMP. Does that concern you?
I’ve been asked many similar questions, not just about Apple but also about Spotify and Google and what Amazon is doing. My personal philosophy is that for anybody who has run a tech business, or is in a sector that’s highly competitive, I think what you do is, you will never end up building anything if you spend too much time just identifying the fears coming from the larger competitors. Apple is Apple. Apple is huge. Apple is going to do whatever Apple wants to do. The same with Google, the same with Amazon. And Spotify and any other big competitors are going to do what they’re going to do.
My positions has always been very clear: We observe and look at what they want to do, but I always point out the fact that regardless of the transaction, we are a public company to date. And as the only public company in the streaming music industry, we find our own path and we have to find a sustainable growth strategy that reflects the value for the shareholders. We need to focus on what is the best task for us, not so much on what everyone else is doing, and what they will do. Because they’re so much bigger that they will do whatever they want to do anyway, so there’s no part to be fearful or to get crippled because someone bigger is doing something, we just focus on what we need to do and we execute, and what we have demonstrated is that we’re doing a pretty solid job at launching Tidal, now going to be in more than 30 countries by the end of this month. That’s only six months after we launched the brand.
Right now, lossless music is still a niche product. How do you get Tidal seen by audiophiles?
The growing trend of consumers moving toward quality-based products and services, fortunate for us, that macro trend has been the trend for the last couple of years. And the reason I say that in this context is that we were quite fortunate. When the news came out that we were offering lossless hi-fi streaming, the news more or less travelled by itself in the audiophile world. And yes, we did do a lot of press outreach and community outreach, and we did paid marketing as well, but I would actually say that community has been more supportive of our arrival than expected. They really embraced the product, people would just say ‘wow, I’ve been waiting for something like this. The reason I haven’t streamed is because I didn’t want to listen to bad sound. And now you actually offer something that is substantially better than the MP3 quality, so I’m in.’ And that’s one side.
The core audiophiles have been more than supportive of our arrival. Another aspect, similar to what I mentioned earlier, was the hardware manufacturers. The hardware manufacturers were the allies, and the amount of support that they have demonstrated in helping us and integrating Tidal into their product experience has been enormous. We have more business leaps than we imagined, than we can actually handle. because so many hardware manufacturers are trying to include hi-fi streaming into their products because the service drives demand and also validates why people are spending a couple of hundreds euros, a couple of thousands euros, and substantially higher investment, into these audio products.
How do we reach them? To be honest, the fact that we were arriving, we were launching such a service, the news travelled much farther than we had anticipated and it travelled much more organically than we had anticipated.