Jay Z’s move into streaming music may go down as the biggest blunder of his business career. Aspiro, the Swedish company that owns the music streaming services WiMP and Tidal and that the music icon acquired last month for $56 million along with a larger investment group, revealed in a report that it does not have enough money to survive for the next 12 months. The same report revealed that its prospects for catching up or taking market share from Spotify are slim to none.
"Given the current strategic plan and the associated capital needs, the company is not fully funded for the coming 12 months,” Aspiro's board admitted. Turning the ship around, the report continues, will require “significant capital injections over the coming years” as well as “a dedicated owner with relevant experience and knowledge as the streaming market is highly competitive and evolves rapidly.”
Though he rose to prominence as a musician and label owner in the late 1990s and then early 2000s, it would be hard to describe Jay Z (real name Shawn Carter) as a digital music business maven. Prior to the Aspiro move, Carter's only real move into digital music came in 2013, when he partnered with Samsung to bundle his album “Magna Carta Holy Grail” into Samsung Galaxy phones.
Aspiro's WiMP and Tidal services, largely unknown outside Scandinavia, are marching onto an intensely competitive battlefield both in the United States and abroad. Pure-play competitors like Spotify, which has 60 million active users, are bigger, better-capitalized and more widely known. And later this year, it is expected that giants Apple and Google will debut services of their own. “Aspiro has arguably neither the same scale advantages nor access to funding as its main competitors,” the report said.
The report concludes that Aspiro would "have to achieve an extreme and unprecedented growth in number of subscribers" simply to survive, and that “even after deployment of significant amounts of capital, the return for shareholders would be very uncertain given the competitiveness of the market.”
Aspiro is already on the short list of the most regrettable investments Carter has ever made, but is it the worst? Carter, whose net worth totaled $520 million in 2014, has a mixed track record as an investor. The 40/40 Club, Carter’s sports-themed nightclub, has had to close half of its locations. Carol’s Daughter, a hair and makeup products company that Carter invested in many years ago, was forced to close all but two of its stores last year and had applied for a $3 million loan before it was ultimately acquired by L’Oreal in October 2014.
The Barclays Center, the Brooklyn arena that’s home to the Brooklyn Nets, traded on its association with Jay Z as a part-owner, but the rap star netted a mere $1.5 million when he cashed out his stake in 2013.
Carter has fared better as a broker for other marketing deals. His talent agency, Roc Nation, counts global superstars like Kevin Durant and Robinson Cano as clients, and Translation, an advertising agency he co-founded with Steve Stoute, works with a number of top brands, including State Farm and American Eagle.
Carter hasn't proven himself as someone who can turn around the long-term fortunes of any business. Many of the products he’s been tapped to promote or reboot have not benefitted much from his involvement. Consumption of Cherry Coke, which Carter was brought in to relaunch in 2007, is up just 6 percent from where it sat in 2008. The S. Carter, a shoe line that Carter developed for Reebok, wound up being only a modest seller for the shoe brand.