Apple is looking to acquire Tidal Music, and while it’s not exactly clear if the deal is necessarily accretive for shareholders, it at least addresses the limitations of Apple’s Music library as Tidal does have a selection of music from Jay Z, Beyonce and Kanye West that’s inaccessible to other platforms. On the contrary, Apple also has exclusive streaming rights with Taylor Swift and Drake, so the music dynamics between the two would be strengthened when consolidated under a single app that shares music rights from all the major labels and artists. That being the case, I’m hesitant to declare this a victory, as the terms of the deal have yet to be disclosed. Gene Munster at PiperJaffray mentions “Our best guess is the deal price would be below $500m, compared to Apple's Beats Music acquisition in May of 2014 for $3b.” I believe that value estimate is well-intentioned, but could also prove too conservative, as larger tech franchises pay a higher premium for smaller acquisitions. A good example is Microsoft’s recent acquisition of LinkedIn. If Apple is serious about acquiring Tidal, it’s to increase the installed base of users for Apple Music. I find it highly improbable that Apple will continue to offer Tidal as a service, as it’s meant to diminish the field of competitors, increase Apple’s market share, and boost the value of its music library. To gain all of these strategic advantages Apple may ultimately pay a massive market premium above $500 million for the music rival. That being the case, Tidal has a subscription base of 4.2 million, which is a lot smaller than the bigger music apps at installed bases of roughly 100 million subscribers for Spotify, and roughly 70 to 80 million for Pandora (inclusive of paid and non-paid). Apple currently has 15 million paying subscribers, so if it were to include Tidal’s subscription base the figure swells to around 20 million, and expands the music library to be more inclusive of super star hits, which is absent in Spotify’s library. Furthermore, Apple is far behind the lead members of the peloton, so an acquisition does make sense here. But, given Apple’s well reported financial strength, the expectations from Jay-Z’s music camp will be much higher. Remember, Apple isn’t negotiating with a starving group of tech entrepreneurs, these musicians are already rich, so you’d have to imagine a substantial premium to sway the opinions of this selective group. After all, Jay-Z gave up equity to attract an A-list group of music artists, so if you had to ask them to cash-in on the one platform the major music artists own as a collective, the price will inflate drastically. After all, musically inclined people want freedom, and greater control over their own music rights. Tidal provided that benefit, but if Tidal were to get acquired from Apple, the same group of artists would become skeptical of their ability to secure favorable royalty/licensing agreements elsewhere. In other words, Apple faces an unusual up-hill battle, as the price tag for Tidal is difficult to determine, and would require more imagination than necessary. Since Apple launched its music streaming service, the impact on competing music applications has been near non-existent as both Spotify and Pandora sustained subscriber churn at respectable levels. While the Tidal acquisition is unlikely to damage the market position of both music apps, it does create a stronger product offering that could give Apple a strategic advantage that neither Pandora or Spotify can offer.