Network Effects and Tidal
Tidal is a music streaming service created by rapper Jay-Z which debuted March, and is co-owned by 18 major artists including Kanye West and Nikki Minaj. Despite all the star power backing it, Tidal is off to a shaky start, and many are skeptical as to its ability to compete with established juggernauts like Apple and Spotify. Perhaps the most obvious reason is that Tidal is the most expensive service, offering a 9.99/month and a “HiFi” 19.99/month subscription. As the article points out, people are not going to flock to the service that costs more, when sites like Spotify offer free and discounted subscriptions.
Tidal’s performance can be explained using network effects. Tidal is a relatively new product that performs the same general task as its competitors, but it needs to be able to attract more consumers. As the article points out, using star power isn’t the right approach to attract consumers—it’s price. If Tidal is to compete with the established products, it will need to lower its price to compete, or perhaps offer a free version of its product. If it does not change its price, or offer a superior product, then its consumers will never pass the tipping point, and Tidal will go the way of MySpace.
Link to article: http://www.cnbc.com/2015/10/23/jayzs-tidal-dogged-by-doubts-as-service-notches-1m-users.html