Financial services provider Square Inc. today revealed it has purchased a majority stake in Aspiro AB, the owner of the Tidal music streaming service, for $297 million.

The exact size of the stake, made with a combination of cash and stock, was not disclosed. Under the terms of the deal, previous majority owner Jay-Z is joining Square’s board, while other famous music artists that currently own minority shares in the company will remain as shareholders.

Founded in 2014 and acquired by Jay-Z for $56 million in March 2015, the service differentiates itself by offering high-fidelity music streaming for $20 a month, as well as a lower-quality stream for $10 a month.

It competes directly with Spotify Technology SA, Apple Inc. and Amazon.com Inc. in the streaming music market. In offering no free version and only relatively high-priced subscription options, Tidal has struggled to find users.

A month after launching in 2015, the service was described as sinking like a brick and though it carved out a niche audience, it has never achieved a significant market share. Obtaining a hard number for the company is difficult as well; as of 2019, it was lumped in the 14% of music streaming companies regarded as “others” in data provided by Statista.

A report in 2016 claimed that Apple was holding talks to acquire Tidal, but nothing further came of those talks.

The obvious question is why would a payment service such as Square, run by Jack Dorsey, who is also the chief executive of Twitter Inc., want to buy a less-than-successful music streaming service for an arguably high price. Officially the acquisition is being pitched as extending “Square’s purpose of economic empowerment to a new vertical: musicians.”

“It comes down to one simple idea: finding new ways for artists to support their work,” said Dorsey said in a statement. “New ideas are found at intersections and we believe there’s a compelling one between music and the economy. I knew Tidal was something special as soon as I experienced it and it will continue to be the best home for music, musicians and culture.”

Recode suggested that the deal may be focused around things such as Square selling T-shirts for musicians on tour but noted that the two companies could also work on non-fungible tokens. Known more commonly as NFTs, the tokens operate on the Ethereum blockchain and offer a collector’s item that can’t be duplicated. As CNBC wrote, people are buying NFTs these days out of the belief that they’ll be able to prove ownership of a virtual item thanks to blockchain.

Investors were not pleased with the news of the acquisition. Square’s share price dropped 6.7% in regular trading, to $218.41. Square’s stock dropped a further 3% in after-hours trading.

Photo: Jack Dorsey/Twitter