Ever since Apple Inc. (AAPL) unveiled iTunes, it has been a paradigm-shifting force in the music business, changing the way we consume, pay for and store our favorite tunes. Samsung (SSNLF), on the other hand, has never been thought of as a major player.
Sure, Samsung and AAPL have a pretty straightforward rivalry in the smartphone and tablet markets, highlighted by a series of patent lawsuits that began in 2011, but music? SSNLF isn’t a player there.
Well, it would appear that the Korean electronics giant wants that to change. A recent New York Post report cites sources claiming that Samsung and Alphabet Inc (GOOG, GOOGL) are both interested in acquiring an up-and-coming Apple Music competitor: Tidal.
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Tidal made big waves earlier in February when Kanye West released his newest album, The Life of Pablo, exclusively through the service, which his mentor and frequent collaborator, Jay-Z — one of 10 Surprisingly Savvy Celebrity Investors we recently highlighted — has been running since purchasing it for $56 million last year.
Besides SSNLF and Alphabet, Spotify is also interested in acquiring or partnering with Tidal. AAPL has not been mentioned as a suitor.
Tidal is differentiated from other music streaming services because it offers high-fidelity streams and because it’s an artist-owned collective.
On one hand, it makes sense that Apple wouldn’t necessarily be seeking to acquire Tidal; it bought Beats, Dr. Dre’s headphone and streaming music company, for $3 billion in 2014. The part-AAPL-stock, part-cash deal helped cement Dre as one of the best celebrity investors, along with Jay-Z.
But on the other hand, Tidal is a somewhat unique service: It’s an artist-owned collective, with top-tier artists like Madonna, Rihanna, Alicia Keys, Nicki Minaj, Kanye West, Beyonce, Dedmau5, J. Cole, Daft Punk, Calvin Harris and others all counting themselves as major shareholders. It’s a conscious rebellion by musicians who think the current economics of music streaming are increasingly unfair.
In other words, with such an influential list of popular musicians behind it, acquiring Tidal would give SSNLF some major gunpowder to battle Apple with. Not only is Kanye — perhaps the most popular rapper alive today — dropping exclusive releases on it, but so is mega-pop star Beyonce.
Samsung would acquire Tidal and its 1 million subscribers, which it has quickly amassed organically and should continue to increase. Meanwhile Apple Music has 10 million subscribers, a number that one BloombergView columnist deemed “underwhelming” given the fact AAPL pushed the service on all iPhone, iPad and iPod Touch users in an iOS update.
Unfortunately for AAPL, SSNLF is far more likely to acquire or reach some other partnership deal with Tidal, which reportedly has a current valuation around $100 million according to the Post report.
While that’s nearly double the $56 million Jay-Z shelled out for the service in 2014, it could be worth even more with Samsung, a deep-pocketed company with a huge mobile presence, behind it.
Watch out Apple Music: A tsunami may be looming if SSNLF ends up pulling the trigger on Tidal.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
