However, there could be several reasons - “perhaps not so lofty as those Dorsey suggested - that this deal isn’t as utterly random as it sounds,” Walker claims. Walker pointed out in a blog post that the thread that soon followed provided somewhat vague PR-speak responses and answers to that question: “New ideas are found at the intersections, and we believe there’s a compelling one between music and the economy.”Īlthough that’s likely to be expected at the announcement stage of a “distinctly unexpected” partnership, Walker described the “immediate” market reaction as “tepid,” with Square shares dropping around 6.75% on Thursday (March 4, 2021). Square CEO Jack Dorsey confirmed the deal via Twitter - the other company he manages - where he “preemptively” raised the obvious question: “Why would a music streaming company and a financial services company join forces?” Block Inc must navigate these challenges and demonstrate its ability to turn Tidal around and make it a profitable venture.According to the announcement, $297 million in cash and stock was provided for the acquisition. The acquisition included not only Tidal’s user base and content deals but also its legal liabilities and obligations. The future of Tidal under Block ownership remains to be determined.
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Still, under Delaware law, “a board comprised of a majority of disinterested and independent directors is free to make a terrible business decision without any meaningful threat of liability, so long as the directors approve the action in good faith.” The judge noted that Dorsey may have been “incapable of impartially” considering the acquisition due to his relationship with Jay-Z and effectively used the purchase to further “bolster his relationship” with the artist. Still, the judge admits that it “seemed, by all accounts, a terrible business decision.” Nevertheless, a Delaware judge dismissed the class action last week, saying that the case did not show the directors acted in bad faith. In a follow-up meeting, the transaction committee discussed Tidal’s financial and legal struggles and that Dorsey was “the sole Block management member in support of the acquisition.”ĭespite all this, the deal moved forward in March 2021. The plaintiffs said that a Block transaction committee met to discuss the Tidal acquisition for only 35 minutes in September 2020. Dorsey had suggested Block, then called Square, acquire Tidal during a videoconference meeting he took from the Hamptons in 2020, says VICE. Indeed, Dorsey got the idea to buy Tidal while “summering” with Jay-Z’s family in the Hamptons. Dorsey donated $10 million to Jay-Z and Beyoncé’s nonprofit in May 2020 and even vacationed with Jay-Z in Hawaii just days after the acquisition process kicked off. However, Jay-Z and Dorsey have a history of working together, including collaborating on a Bitcoin development fund and sharing interests in cryptocurrency and philanthropy.
The platform also faced a US federal lawsuit by artists who said they were owed royalties and a Norwegian criminal investigation over concerns about its inflated streaming numbers. Tidal had suffered “multimillion-dollar losses in each of its previous ten quarters,” had lost significant contracts, and accepted a $50 million loan from Jay-Z to shore up its finances. By 2020, Tidal had signed up 2.1 million paying subscribers, compared with Spotify’s 138 million, Apple Music’s 60 million, and Amazon Music’s 55 million.
Jay-Z initially bought Tidal (then called Aspiro) with several others in 2015 for $56 million.
According to Reuters, the complaint quoted an NYU business professor who called the purchase “a $300 million bar tab to hang out with Jay-Z.” Shareholders, led by a Florida pension fund, launched a class action suit claiming that Dorsey only bought Tidal as a favor to his friend, Jay-Z. The purchase of Tidal has been met with skepticism due to Tidal’s financial struggles and legal disputes. Jay-Z joined Block’s board after the purchase and remains a director. After adjustments, it paid $237.3 million for an 86.2% stake, according to Reuters. This deal made Jay-Z a board member of Block Inc and left many wondering whether Dorsey had been finessed into buying the relatively small streaming service at a premium price.īlock agreed in March 2021 to pay $396 million in stock and cash for an 87.5% stake in Tidal. In 2021, Jack Dorsey’s company, Block Inc (formerly known as Square), agreed to acquire Tidal for $306 million.
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