Telecommunications company Sprint (S) - Get Free Report , owned by Japan's SoftBank Group (SFTBY) , has acquired a 33% stake in music streaming app Tidal, which rapper Jay Z bought in January 2015 for $56 million.
Financial terms of the deal were not disclosed in a statement Monday, but as part of the deal, Jay Z and the artist-owners of the app including Beyonce, Madonna, Kanye West and Alicia Keys, will continue to run Tidal while Sprint's chief executive officer, Marcelo Claure, will join Tidal's board of directors.
Jay Z's S. Carter Enterprises owns Tidal parent company Aspiro.
"Sprint's acquisition of Tidal fits into the broader trend of telecommunications companies getting more video and music content through the purchase of stakes in digital media companies," said Amy Yong, analyst at Macquarie Capital. "The music streaming industry is struggling, but Sprint's acquisition of Tidal is more about differentiating itself from other competitors than making immediate profits off the purchase."
Sprint's stake in Tidal comes as telecommunications companies increasingly acquire content providers to enrich their digital assets portfolio.
While the deal between AT&T (T) - Get Free Report and Time Warner (TWX) is still awaiting President Donald Trump's approval, deals such as this and Verizon Communications' (VZ) - Get Free Report $4.8 billion acquisition of Yahoo! (YHOO) 's core assets signify a digital convergence where the lines between technology and media are blurring.
The deal will give Sprint's 45 million retail customers unlimited access to exclusive artist content on Tidal, which saw rising subscriber numbers after singer Beyonce made her visual album Lemonade a Tidal exclusive last year.
However, even with offers of early access and exclusive content, Tidal still trails behind music streaming giants like Apple Inc.'s (AAPL) - Get Free Report Apple Music, Spotify and Pandora Media (P) . Aspiro, the Swedish holding company of Tidal, recorded a net loss of 239 million Swedish kronor ($28 million), nearly three times bigger than its 2014 loss.
"Sprint shares our view of revolutionizing the creative industry to allow artists to connect directly with their fans and reach their fullest, shared potential," Jay Z said in Monday's statement. "[Claure] understood our goal right away, and together we are excited to bring Sprint's 45 million customers an unmatched entertainment experience."
Sprint and Tidal first started working together in 2015, announcing a partnership that was light on details at the relaunch event of Tidal in March. Sprint then declined to make an investment or forge an exclusive partnership with Tidal in April.
Tidal, with majority artist stakeholders, has since become available in more than 52 countries, with a catalog of more than 42.5 million songs and 140,000 high-quality videos, the company claims. The deal comes just days after Tidal was accused of inflating its subscriber numbers by Norwegian newspaper Dagens Nringsliv, which alleges the company announced in March last year 3 million subscribers while having only 1.2 million activated accounts and 850,000 subscribers.
Although Sprint still holds partnership deals with Rhapsody International's Napster and Spotify, offering Spotify Premium for six months free and later at a discounted rate when customers sign up for premium Sprint mobile services, the company seems to indicate that it will promote Tidal on a broader basis and larger scale given the 33% stake.
A source familiar with the matter told Billboard that the purchase was for $200 million.
"I do want to reinforce that today's announcement is all about Sprint's 33% acquisition of Tidal," a Sprint spokeswoman said. "This partnership is going to bring artists and fans together through unique music and content experiences and provide exclusive content and one-of-a-kind opportunities only available to new and current Sprint customers. More news on exclusive offers and upcoming promotions from Sprint and Tidal will be unveiled soon."
Tidal did not respond to a request for comment.