Square Acquires Majority Stake in Tidal, Jay-Z Joins Board

Square Acquires Majority Stake in Tidal

This morning, Square, a financial technology company serving individuals and businesses alike, revealed its acquisition of a controlling interest in Tidal, a prominent music streaming platform.

The transaction, valued at approximately $297 million, is structured to allow existing artist-partners to retain their ownership within the music service.

Dorsey Explains the Rationale

Square’s CEO, Jack Dorsey, utilized his other platform, Twitter, to articulate the reasoning behind this acquisition.

Dorsey anticipated potential skepticism surrounding the deal – a reaction that has indeed materialized.

He posed a rhetorical inquiry: “Why would a music streaming service and a financial services provider combine their efforts?!”

Convergence of Music and Finance

Dorsey believes Square can replicate the success seen with Cash App and other Square offerings within the music industry.

He highlighted that innovative concepts often emerge at the intersection of different fields, asserting that the convergence of “music and the economy” represents such a point.

Jay-Z Joins Square’s Board

The agreement also results in musician and entrepreneur Jay-Z taking a seat on Square’s board of directors.

Initial Reactions and Past Acquisitions

Early responses to the deal have been mixed, with some questioning the synergy between Square and Tidal.

Square’s history includes acquisitions that didn’t fully integrate, such as the 2014 purchase of Caviar, which was later sold to DoorDash in 2019.

The Bull Case for the Acquisition

However, a strong argument can be made in favor of the Square-Tidal partnership.

The fintech company invested a small fraction of its overall market capitalization in Tidal.

By allowing artists to maintain their stake, Square has effectively gained a network of brand advocates.

Disrupting the Music Industry

Dorsey points out Square’s success in transforming commerce for many offline businesses with its initial card reader.

Why not attempt to disrupt the music industry, which has undergone a similar transition from physical to digital formats in recent years?

Shifting Seller Ecosystem

Square’s user base, referred to as its “seller ecosystem,” is becoming increasingly digital.

Recent earnings reports show a decline in “in-person only” transactions as a percentage of gross payment volume (GPV), with “online only” and “omnichannel” GPV filling the gap.

Cash App and Potential Synergies

Square’s Cash App has experienced significant growth, reaching 36 million monthly active users in December 2020, up from 24 million the previous year.

Opportunities exist to integrate Tidal with Cash App’s younger demographic.

Jay-Z’s presence on the Square board is expected to foster innovation and provide valuable insights.

The Potential of NFTs

The emergence of non-fungible tokens (NFTs), a new type of digital asset, presents another potential avenue for Square.

Given Square’s growing involvement in cryptocurrency through Cash App and its substantial investment in Bitcoin, exploring music-based NFTs for its user base is a compelling possibility.

This acquisition could position Square as a leader in this emerging market.

While the Square-Tidal deal may not yield the growth Square anticipates, the acquisition is financially sound, secures a valuable leader in Jay-Z, and demonstrates a proactive approach to innovation.

Early Stage Event Information

Early Stage is a leading event providing practical guidance for startup entrepreneurs and investors.

Attendees will gain firsthand knowledge from successful founders and venture capitalists regarding business building, fundraising, and portfolio management.

Comprehensive Coverage

The event will cover all aspects of company development, including:

• Fundraising
• Recruiting
• Sales
• Product Market Fit
• PR
• Marketing
• Brand Building

Each session incorporates audience participation, allowing for questions and discussion.