Square is buying a majority stake in Tidal

Jay-Z will sit on the Square board.

Thomas Trutschel/Photothek via Getty Images

The rumors of Square buying Tidal proved true. Square has bought a majority stake in Tidal for the equivalent of $297 million in cash and stock. Jack Dorsey, Square's CEO (and Twitter's, for that matter), explained the deal as a bid to find "new ways" for artists to get paid — he believes the success Square has had with sellers and the Cash App can translate to the music industry.

Jay-Z (who's already collaborating with Dorsey on a Bitcoin fund) is still involved, and will join Square's board of directors with influence over other products. The purchase also cuts out third party investors. Only the artists themselves hold Tidal's remaining shares, Square said. Tidal will operate independently if the deal closes as expected in the second quarter of 2021.

Dorsey wasn't too specific about his plans for Tidal in outlining the move. He stressed that Square would "start small" with the most important needs for artists, and he envisioned "new listening experiences" that would help fans connect, simplify merch sales and enable collaboration.

How well the combination works isn't clear. Square's seller and payment businesses are thriving, and it might give Tidal an edge when rival music services like Spotify have only dipped their toes into merch and have butted heads with the industry over royalties. Musicians might gravitate toward Tidal if they think they'll profit more from its tie-ins.

With that said, Tidal might not have the user base to drive the changes Square wants. The service hasn't recently said how many subscribers it has, and it's believed to trail behind the tens of millions of subscribers at Spotify, Apple Music and Amazon Music. Square may either have to grow Tidal's audience or find ways to help artists regardless of where people are listening.