Jack Dorsey may be looking to diversify Square — with a little help from Jay-Z.
Dorsey, who serves as CEO for both Square and Twitter, has been discussing a possible acquisition of music streaming service Tidal, according to Bloomberg. The deal, if it happens at all, would signal a shift for Square, a digital payment company with no prior history in music or streaming. The news of talks between Dorsey and rapper Jay-Z, who owns Tidal, comes after the two were photographed together in the Hamptons in August, and again in Hawaii in December.
It’s not entirely clear what Square would have to gain from acquiring Tidal, other than diversification and a foothold in the music streaming industry. Currently, Square has two main arms, Square Seller and Cash App, which both have their own executives running separate teams. Square Seller focuses on tools for small businesses, including point of sale and financial software, while Cash App is a mobile payment service.
Tidal, meanwhile, could benefit from an acquisition. The streaming service has had trouble keeping up with the likes of Spotify, which has 144 million premium users, and Apple Music, which has 72 million. Tidal, meanwhile, hasn’t released user stats since 2016, when it had only 3 million paid subscribers. Jay-Z initially removed his music from other services when launching Tidal, only to put back his catalog on Spotify and Apple Music last year, which could mean that Tidal isn’t doing as well as he’d hoped.
Jay-Z bought Tidal in 2015 for $56 million, but he’s not the sole owner. Tidal prides itself on being artist-owned, with names like Beyoncé, Rihanna, Daft Punk, Jack White, and Madonna each owning a cut. If Tidal were acquired, it’s unclear how these artists would be affected — other than benefitting from a potential payout.
An acquisition could be good for both Square and Tidal. New upper management could pump some life into Tidal, which has lagged behind other streaming services for years, and guidance from Dorsey could translate into growth for the company.
Square, meanwhile, could be headed towards a new status as an umbrella company, much like Tencent or Disney, with seemingly unrelated holdings across several industries under one name. Tencent, for example, runs companies across the music, gaming, entertainment, social media, and e-commerce industries. Tencent Music Entertainment — which runs a China-based music streaming platform — alone has 700 million active users.
Square’s last foray into diversification came when it bought food delivery startup Caviar in 2014 for $90 million. Unlike its competitors, Caviar delivered food from high-end restaurants. Four years later, Square launched a software platform for restaurant sales. Despite heavy investment in the industry as a way to integrate more small businesses into Square’s payment system, the company sold Caviar to DoorDash in 2019 for $410 million, almost five times what it was purchased for. Square and Twitter's continued success, coupled with profitable acquisitions like Caviar, prove Dorsey has a reliable track record building companies.
The talks between Jay-Z and Dorsey were private, according to Bloomberg’s report, meaning that an acquisition may be far off, if one is to take place at all.