perspectives case

8/17/2019 Perspectives Case

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Welcome!Welcome to the Perspectives Case Competition 2016! The event is a business competition where

students will work in teams to solve the case provided.

Participants will analyze all areas of TIDAL music to improve their marketing, strategic, and financial

efforts. This competition is based on an elimination process. There will be two rounds of presentations.

In each round, teams will be responding to a crisis component to simulate real market behaviour in the

industry. Our crises will significantly affect the solution you come up with over the next week. In our first

round, your team will be given 150 minutes to respond to this crises component and change your

solution to the case appropriately. You will then be distributed to 5 different judging rooms with 5

teams each to present your solution.

Teams will be given the crisis component in a staggered structure. We will have five heats with a 15

minute pause between each heat. This ensures that each team gets allocated an identical amount of

time to ensure a fair competition (i.e teams waiting to present do not get an unfair advantage over

teams that are presenting first).

The top 3 teams will then be invited to take part in the final round. Our second round will be an even

harder crisis that teams will have to respond to within 45 minutes. These teams will be presenting to a

live audience and to a panel of judges. The second round will not have a staggered structure but we

will ensure that teams that are waiting to present do not get a chance to further communicate andimprove their solution. This will ensure fairness for all 3 final teams.

Good luck to all teams, and we look forward to hearing your perspectives!


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Judging Process and Criteria

Problem Definition and Analysis (15 points)

! Definition of problem and key issues! Qualitative and quantitative analyses

! Analysis of company & industry (market segmentation)

Alternatives and Implementation (35 points)! Evaluation of feasible and actionable alternatives

! Solutions and final recommendation

! Justification of recommendation

! Realism and practicality of solutions

! Strategic orientation and focus! Logical tie-in to analysis

! Consideration of cost and control issues

! Timeline and analysis of potential problems

Crisis component (30 points)! Consideration of how the crisis affects each area of their strategic plan

! Consideration of how the crisis will affect their compensation package

! Creativity in response to the crisis

! Feasibility of the new solutions

! Quality of explanation on how the crisis affected their initial solution

Organization / Overall Presentation (20 points)! Ability to defend position if and/or when questioned

! Clarity and style of presentation

! Communication skills

! Poise

! Professionalism

! Use of Time


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Overview of the Digital Music Industry

The launch of iTunes in 2001 kickstarted a new revolution for music listeners. The age of CD’s, vinyls,

and analog sounds would soon be replaced by readily accessible MPEG-3 files that could be

downloaded on any device, anywhere. Since the introduction of this technology, the global digital

music market has skyrocketed and now has a market size of $6.85B as of 2015. In fact, the size of this

market has increased by more than 150% over the past half-decade. Specifically, digital revenue growth

has been driven by regions such as South Korea, Germany, and Latin America, which have a strong

music culture and sense of loyalty towards compensating their artists appropriately.

Piracy and its Caveats

Unexpected by companies, such as Apple and others, the widespread distribution of music along

multiple digital platforms brought about unseen problems. Quickly tapping into this opportunity,

softwares and websites, such as LimeWire and The Pirate Bay, started distributing intellectual property

for free to anyone that had an internet connection. This has singlehandedly reduced the compensation

of artists the most. In a recent report, the Institute for Innovation Policy estimated the loss to U.S output

to be over $12.5 billion annually. Moreover, as a result of sound recording piracy, the U.S loses over

71,060 jobs annually.

Streaming… A Saviour or a Red Herring?

Many music labels and software companies have been slow in their response to the impending crisis

of piracy. A static approach to condemning piracy and closing down websites that distribute

content for free has not been effective. The Internet is a democratic space and assuming that

piracy can be ridden on such a platform is a backwards approach. Dynamic and innovative

companies such as TIDAL, Spotify, and Napster have responded to the new trend of Millennials

preferring access over ownership. Indeed, subscription related income has been the fastest growing

sector of the global digital music industry with over 39% growth in 2014.

However, the streaming industry has faced a considerable amount of resistance from music labels and

high profile artists over the past few years. On November 2014, Taylor Swift, a global pop star, pulled

back all her albums off the global streaming service Spotify. In an recent interview, Taylor Swift revealed

that Spotify’s streaming service only compensated her with $500,000 annually for distribution rights to

her music. For an artist that makes over $40M in touring annually, Taylor Swift and her label found this

valuation incomprehensible. In response, Spotify has responded by saying that it compensates Taylor

Swift’s label with over $2M annually and her low payouts are a result of how music labels have contracts

structured with their artists ; Spotify is merely responding to the current business model in the market.


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Some of the questions music streaming companies should be asking in the current landscape include:

(1) How can we bypass music labels to compensate artists appropriately?

(2) Are we just creating value for artists through their sales of music? Are we not more than that?

(3) Do we need to diversify the revenue streams that are available to artists on our platform?

The Value Gap: A Case of Loose LegislationOne of the biggest debates happening in the music industry is that of neutral hosting. A neutral host is

defined as someone who is distributing music on a platform but is not directly monetizing off of the

content. Under certain legislation, users of websites such as YouTube and the Daily Motion are allowed

to distribute copyrighted material without any severe copyright infringement consequences. As a result

of neutral hosting, YouTube, which has over a billion unique users every single year, only generates

$641M off its ad content. On the other hand, Spotify (which is not regarded as a neutral host) generated

over $1.6B in revenue over the past year with only 40M paid users. Some analysts predict that if tighter

legislation was introduced surrounding neutral hosting, the size of the global digital music industry

would increase by 250%. The burden of abiding by copyright law would then shift towards websites

such as YouTube, rather than to artists who reach out to these websites to get illegal content removed.

Indeed, most small to medium sized artists cannot afford the legal costs involved in such cases, so they

typically just accept the status quo and monetize what they can off these websites. The possible

elimination of neutral hosting raises some key issues for all streaming companies:

(1) Is the elimination of neutral hosting a feasible solution?

(2) Will consumers even pay for music if they can’t try it for free first on YouTube?

(3) Is Spotify’s freemium service part of the problem too? Are they not shifting the blame?


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Overview of TIDAL Music

TIDAL is a subscription-based music streaming service that was founded in 2014 by the Norwegian

public company Aspiro. In the first quarter of 2015, the service was acquired by well-known rapper and

entrepreneur Shawn ‘Jay Z’ Carter. As a response to well-known streaming services such as Spotify and

Napster, TIDAL has tried to carve out its own niche market by combining several unique selling points

such as lossless audio quality, exclusive content, high definition videos, and curated editorial content.

The service has consistently grown since its acquisition and is now offering over 25 million tracks and

80,000 music videos.

A Marketing Disaster

On March 30th 2015, TIDAL released a snippet on YouTube of a press conference they held where

popular artists such as Daft Punk, Kanye West, Madonna and others collaborated to speak about the

music industry’s future and how to bring ‘art at the forefront of humanity again’. This video was a public

relations disaster and has received widespread critique for being too ‘egomaniacal’ and

unrepresentative of actual artists.

Here is a link to the video: https://www.youtube.com/watch?v=cYYGdcLbFkw

This video singlehandedly ruined the image of TIDAL among the general public and its investors. Can

TIDAL ever recover and recreate its brand image? Should famous artists be on the forefront of TIDAL’s

marketing content?

Unattractive USPsTwo of TIDAL’s major unique selling points, lossless audio quality and exclusive content, have been

unsuccessful in the market. Lossless audio quality has been received as a poor initiative, since most

music listeners do not have the headphone capabilities to notice a difference between FLAC quality

audio (Tidal) vs 256KPS AAC (Apple Music) vs 320KPS (Spotify). On top of this, the general conception

among music listeners is that they really don’t care much for FLAC quality music. Indeed, data

limitations on most mobile subscriptions limit the amount of high fidelity music most people can listen

to. Furthermore, exclusive content has had a dismal public response as well. Artists that have released

music videos and songs exclusively on TIDAL have had little success (Madonna) and some have evenpulled their content off of TIDAL to distribute it elsewhere. The problems with exclusivity can be

summed up like this:

(1) Say I want to listen to music by my favourite artist

(2) I must subscribe to the platform they are exclusive on

(3) If another artist I like is also exclusive on another platform

(4) I must subscribe to that platform, too

https://www.youtube.com/watch?v=cYYGdcLbFkw


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(5) I am now paying upwards of $30-40 a month to listen to all my music

(6) Piracy is attractive again

(7) I no longer pay for music streaming services

A prevailing mindset among the youth of today is that music should be free, almost like a public good.

Launching an exclusive product in such an environment is extremely hard. How would you change the

business strategy that TIDAL is undertaking? Would you remove any of the above USP’s? Is there a way

to increase high quality headphone availability?

Compensating Artists

Almost all streaming services are facing backlash from the music industry on the poor compensation

that artists are receiving per stream ($0.007 for Tidal). This devaluation of intellectual property is one of

the biggest issues facing Spotify’s business. We believe that as TIDAL grows, it will start facing these

same problems, too. In an industry where artists are becoming more and more powerful, TIDAL must

create a financial plan for these artists that adequately compensates them for their intellectual property.TIDAL’s platform is useless if the best artists are not placing their premium songs and albums on it.

One of the barriers facing streaming services compensating their artists appropriately is the 70/30 deal

that most artists have with their labels. If only 30% of revenue goes to the artists, how can TIDAL ever

compensate its artists fairly. Is there a creative solution that you can think of? Are streaming services

really a service for monetary gain or are they an exposure instrument? How do you generate further

revenue streams for artists on TIDAL?

Your tasks include but are not limited to:

1. Designing a short and concise marketing plan that outlines how you would go about changing the

brand TIDAL projects to its audience.

2. Devising a strategic plan that successfully differentiates TIDAL in today’s competitive streaming

market.

3. Developing a financially viable compensation package to pitch to artists in the future. Make your

plan dynamic so that it includes new creative sources of revenue that TIDAL can generate.


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Appendix

Figure 1. Spotify’s Artist Compensation Package

Figure 2. Global Digital Revenues ($US Billions)

Figure 3. Revenues by Sector

2009 2010 2011 2012 2013 2014

Permanent Downloads

Ad-Supported Income

Other.

Subscription Income

$6.85 bn

USD

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