One of the biggest rappers in the world may align himself with the soon-to-be fourth-biggest U.S. wireless carrier.
Jay Z, the hip-hop artist your grandmother is most likely to have heard of, might make a deal for Sprint (NYSE:S) and/or its parent corporation Softbank (NASDAQOTH:SFTBF) to partner with his Tidal music service. The two companies acknowledged they are talking, but Sprint issued a statement to USA Today denying that a deal has been made.
The discussions, according to the struggling phone company, involve "how to best to make the service available to its customers. We are working together in partnership for the vision of the common cause of reestablishing the value of music, it is NOT a financial investment or exclusive partnership."
While a deal has not yet happened, an agreement between Tidal and Sprint makes sense. The music service desperately needs distribution and the wireless carrier needs to be associated with something cool.
What is Tidal
Tidal is a streaming music service with a paid model very similar to the one used by industry leader Spotify and by Beats, which new owner Apple (NASDAQ:AAPL) is expected to relaunch this summer. The company offers an all-you-can-listen-to subscription service that costs $10 for a lower-quality audio version and $20 for a higher-end experience.
TIdal, which only has 500,000 users, according to USA Today, has gotten an enormous amount of attention due to being purchased by Jay Z and a number of other high-profile artists . The hip-hop artist and business mogul has not revealed all his plans for the service, but he told the newspaper he ultimately sees it as more than just a streaming service.
"This isn't just about music; it's also about concert ticketing," Jay Z said while speaking with Tidal executive Vania Schlogel to students at New York University's Clive Davis Institute of Recorded Music. "It's a holistic place where the artists will live in. You may be able to download a song for free, but you're not getting into concerts for free. There are different things that we offer. It's not just songs -- we're offering value," he said, according to a transcript of the event on Fader.com.
Why would Sprint want this?
Sprint's attempts to gain ground on industry leaders Verizon and AT&T have consistently been overshadowed by T-Mobile (NASDAQ:TMUS) and its rock star-like CEO John Legere. The brash "Un-carrier" boss has made his company the cool choice and has tied actual music into its offerings by delivering a number of streaming services without the data used counting against your plan's allotment.
Hooking up with Jay Z and Tidal gives Sprint an answer to T-Mobile's hipness factor and its free streaming music offer. It could also give the carrier's customers access to exclusive music content from Jay Z and partners including Madonna, Coldplay, Alicia Keys, Rihanna, and Usher.
Why does Tidal want this?
While Sprint might soon fall behind T-Mobile and become the fourth-largest wireless carrier, the company still has 56 million subscribers. That's a huge user base to market a discounted or even included-in-your-plan version of Tidal.
This type of deal would not be unprecedented -- the pre-Apple Beats had a deal with AT&T that allowed families to buy multiperson subscriptions at a heavily discounted price.
"A bundle deal would be especially helpful for Tidal, which lacks the name recognition of Spotify or the Apple-owned Beats Music," Time's Victor Luckerson wrote. "And the more tightly packaged the service is into customers' wireless plans, the better for Tidal — Spotify has found that customers who sign up for so-called "hard bundles," in which its music service is included in the standard monthly rate instead of as an add-on, end up keeping Spotify 80% of the time even after the discount period ends."
This deal should happen
This is one of those rare cases in which a deal should be made because both sides badly need each other. Tidal needs to add customers and produce revenue. If it can do that and show quick growth its partner artists might decide it makes long-term economic success to pull their music (or at least some of it) from other services.
Sprint needs something -- anything -- to get its mojo back, and a deal with a company whose roster of artists includes big stars for pretty much every demographic can only help. Tidal could be a differentiator for Sprint, a music service the other carriers don't offer with exclusive content that draws users.
A deal might not get Tidal to critical mass or keep Sprint ahead of T-Mobile, but it's a good move for both companies.
Daniel Kline owns shares of Apple. He still buys CDs and does not care for the music of Jay Z though he seems like a nice fellow. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.