Tidal reveals its user-centric payout plans and adds a free tier

Tidal is the latest streaming service to explore user-centric payouts for artists. The company will roll its plans out over two phases: ‘direct-to-artist payments’ start today, with a full ‘fan-centered royalties’ system to follow in 2022.

Tidal is also shaking up its business model, introducing a free tier for the first time, initially in the US only. Its two premium tiers will be the $9.99-a-month Tidal HiFi and $19.99-a-month Tidal HiFi Plus.

The user-centric schemes will focus solely on the latter for now, and represent Tidal’s most ambitious move since fintech firm Square acquired it earlier this year. Tidal COO Lior Tibon talked to Music Ally ahead of the announcement to explain more.

(In a streaming context, ‘user-centric’ payouts are when part or all of the royalties from a listener’s subscription go only to the music they listen to, rather than into a wider pool of royalties divided by overall share of streams on the service. Read our primer on the model here if needed.)

Tidal’s direct-to-artist payments launch today, and will see a percentage of each HiFi Plus subscriber’s monthly payment – “up to 10%” according to Tibon – paid directly to their [the subscriber’s] most streamed artists that month. Tidal is making it clear that this payment is “in addition” to streaming royalties, which will continue to be calculated on a ‘pro-rata’ basis.

The direct payments will use Square, its Cash App subsidiary or PayPal. Artists will have to opt in to receive these payments, either when directly invited to by Tidal, or through distributors who at launch include CD Baby, DistroKid, Equity Distribution, Stem, Symphonic, Tunecore, and Vydia.

“It’s really creating a new income stream and a new support function for artists. We’re really hoping that it’s going to help create a more sustainable ecosystem across the board,” said Tibon.

What about artists signed to major and independent labels? Tibon said that Tidal is keen for them to register for the direct payments too. “We’re inviting everyone from very big artists to up-and-coming artists.”

The second phase, ‘fan-centered royalties’ will launch early in 2022, and is described by Tidal in its announcement thus: “Royalties attributed to HiFi Plus subscribers will not be aggregated. Rather, royalties will be paid based on the actual streaming activity of individual HiFi Plus subscribers”.

“We’re big fans of that [user-centric] model. We’ve spent a lot of time over the last few months looking at different options,” said Tibon. “We believe that model injects a strong element of transparency on payments and demystifying of the rights, the economics. Where my money goes and who gets what.”

A new ‘activity’ tab within Tidal will show listeners who their most popular artists are, which Tibon said the service wants to use “as the lever to educate, both on the direct payouts as well as the fan-centered royalty model”.

Deezer has tried (but not yet succeeded) to launch a pilot of user-centric payouts in France, while SoundCloud did launch its ‘fan-powered’ royalties system earlier this year, but only for artists who upload directly to its service.

That points to one of the challenges of user-centric payouts: getting labels and distributors (and on the other side of the business, publishers and collecting societies) to agree. How is Tidal tackling that challenge?

“What’s very unique here is we’re going to do it on a very large scale. Well over 100 partners have signed up,” said Tibon. “To my knowledge, that’s the biggest, most expansive attempt to implement that [user-centric]. That includes major independents as well as distributors, across the board, for the HiFi Plus royalty plan.”

But for those who are not signed up yet? “First of all, we’re aiming and hoping that when we launch, starting really in January, we’re going to have everyone sign up. We’re definitely hoping for that,” said Tibon.

“We’re going to use this moment [announcement] today and building up from there in doing more education for the various stakeholders and get everyone on the same page. But there are ways to do it if not every single partner is signed up.”

“You can take it upon yourself as a DSP to report both options, and then pay the higher-of. So in terms of how it flows, there are different mechanisms to implement that, and there could be some cases where we need to start there.”

However, Tibon added that Tidal sees “really, really strong support” for its plans within the industry, partly because the fan-centered royalties’ will initially only be used for its highest tier.

“Because we’re starting from the HiFi Plus tier, and focusing on that, people got more comfortable that it’s an experiment that it makes sense to start, and really understand what it does,” said Tibon.

“For us it’s a very new feature. Not just for us, but for a lot of folks in the industry, so we’re seeing it as a first step that we can take some time to learn and analyse together with the various partners.”

Any future expansion of the fan-centered royalties to Tidal’s $9.99-a-month tier will depend on that process, in other words.

Today’s announcement reflects a wider strategic shift for Tidal, which has traditionally made audio quality the selling point for its highest subscription tier.

There is still an element of that: HiFi Plus will include ‘immersive’ formats including Dolby Atmos and Sony 360 Audio, as well as MQA, which HiFi will not. However, the direct-to-artist payments and fan-centered royalties will play an important part of the pitch to listeners for paying more.

“We’re really looking at that tier as a superfan destination for people who really care about the music, who really care about how their money is being distributed, and who really care about supporting artists,” said Tibon.

For its listeners, that will be the key message that Tidal will be focusing on: “A world where each and every fan understands very clearly where the money goes,” as Tibon put it.

For the industry, Tidal has an additional anti-fraud message. “To me, one of the big advantages of this from a payments perspective is that it immediately neutralises inorganic and abnormal streaming behaviours,” he said.

(This is an angle that has been discussed positively in the past: for example by Music Managers Forum chief Annabella Coldrick in 2018, by Cooking Vinyl boss Martin Goldschmidt in 2021, and by Broken Record campaigner Tom Gray, also in 2021.

“Obviously we’re doing a lot of work ourselves [to tackle stream fraud] but it’s always a challenge, and things always evolve. For me, the impact of neutralising those types of behaviours immediately is very powerful,” said Tibon.

“That has an impact that is very beneficial for artists who want to build their fanbase organically.”

Tidal, of course, has faced scrutiny in the past over its own numbers, including stream counts and subscriber figures, led by the dogged investigation of Norwegian newspaper Dagens Næringsliv. Those reports sparked an investigation of the company in Norway.

Tidal can expect its user-centric moves to be examined carefully as a result. At the same time, perhaps this is its chance to establish clear blue water between the service’s pre and post-Square incarnations.

The eight months since Square acquired Tidal have been spent formulating the streaming service’s strategy for growth in 2022 and beyond, according to Tibon.

“We really took the time to think through what does that [acquisition] mean, and how can we take Square’s overall mission and translate it into the music ecosystem?” he said.

“It’s all about empowering artists, introducing transparency into payments systems and economics systems, and making sure there’s enough support for artists.”

Square is certainly a helpful company to be owned by if you’re exploring new ways to make payments directly to artists, but the company has bigger ambitions.

Its CEO Jack Dorsey talked in March about working with Tidal on “entirely new listening experiences to bring fans closer together, simple integrations for merch sales, modern collaboration tools, and new complementary revenue streams”.

The direct-to-artist payments fall into the latter category, but there is clearly more to come in the year ahead, with Tibon promising that Tidal wants to “innovate not just in terms of the content experience, but also around the back end”.

All of this, and now a free tier – albeit in the US only for now – for a service which, like Apple Music, has historically made its premium-only model a key element of its brand.

“We’ve determined that it’s very important for us to not only introduce all these things, but to make Tidal accessible and explain what we’re all about to a wider audience,” said Tibon.

“It’s really an opportunity for us to introduce Tidal to a lot of new folks, or to people who tried Tidal a few years ago. We’ve changed a lot, and they may not have had the opportunity to check us out,” he added.

“There are a lot of conceptions about Tidal, and many people don’t know what we’re about. We have the full, extensive music catalogue, we have great algorithms, we have these features on the sound side, and now these new payment innovations. So it’s [the free tier] is really all about that: to expand the top of the funnel.”

Tidal has not recently announced any new subscriber figures, although in its last financial results Square said that its ‘corporate and other’ revenues category, which generated $58m in the third quarter of 2021, was “primarily Tidal”. The last publicly announced subscribers figure was three million back in 2016.

Against a backdrop of rival streaming services who count their users in the tens and hundreds of millions, Tidal’s exploration of user-centric payouts may seem limited in its potential impact.

However, set alongside SoundCloud’s launch and Deezer’s efforts, as well as cautious but positive noises coming from the bigger DSPs – see Spotify, Apple and Amazon’s comments at the UK’s streaming economics inquiry in February – Tidal’s move adds to the momentum around user-centric payouts.

Not as a magic silver bullet for the streaming economy’s problems, but as a step in the right direction, and perhaps adding a little more encouragement (or, indeed, pressure) for the rightsholders who are not yet ready to give the model their backing.