The recent announcement of the entry into administration of MQA Ltd. has been one of the most important news of the year so far in the world of audio technology. The company’s main backer seeking a way out of its investment, MQA has been plunged into the uncertain waters of administration as it seeks a way out of an undeniably unenviable financial situation.
The news has implications that go far beyond the company itself and has raised important questions about the future of MQA, its software, and the platforms and brands currently using it. In order to understand the potential effect this restructuring could have on the industry, it is important to look back at the events themselves, why they happened and what the future holds for MQA and the industry as a whole. together.
What is MQA?
MQA stands for Master Quality Authenticated and, in simple terms, is a way to digitally capture and store original master recordings as files small and convenient enough to later stream or download without the usual loss of fidelity typically seen with audio files. compressed. MQA has also paid particular attention to the time domain behavior of its files. This means using proprietary compression to essentially ‘fold up’ sound to make it playable, then, via MQA-certified hardware or software, ‘unfold’ it again so that it can be heard.
MQA tracks use bandwidth comparable to that needed to stream CD-quality audio. Tidal, by the way, is the only streaming service that offers MQA and uses it for its high-res catalog of Masters tracks, something we’ll explore in more depth below.
What happened, and why?
On April 6, 2023, the company that owns the MQA license, currently trading as MQA Ltd. (we use the term MQA interchangeably), announced via statement that it was entering administration, the UK equivalent of filing for Chapter 11 bankruptcy in the US. It was prompted as “MQA’s main backer seeks an exit”, meaning the company is now on the hunt for a replacement to fill the void left after the loss of a major investor.
This, it should be emphasized, is distinct from liquidation in which a company’s assets are dismantled and sold to increase profits, usually as part of an end-of-life offering to raise capital. MQA Ltd., for now, is still a fully operational brand as it continues to trade and negotiate a way forward.
So the big question is why this happened. The withdrawal of MQA’s main financial backer, Reinet Investments, obviously had a significant impact on the company’s financial situation, although the reason for this exit remains unclear. Reports suggest the company was facing considerable monetary difficulties which may have prompted its backer to leave, with rlosses declared in 2020 and 2021 probably does little to promote investor confidence.
Who uses MQA and who might be affected by the news?
So why is it so important to the industry and who is most affected? One of the platforms potentially hardest hit by the news could be our everyone’s favorite streaming service, Tidal. Tidal was the first service to offer high-resolution audio streaming thanks to its early adoption of MQA technology, its Tide Masters transforming into a catalog of millions of high-resolution tracks for the enjoyment of its HiFi Plus subscribers.
However, in a recent Reddit AMA session (ask me anything)Tidal CEO Jesse Dorogusker answered many questions about the company’s future plans for MQA and hi-res audio. According to Dorogusker: “We will soon be introducing high resolution FLAC for our HiFi Plus subscribers. It is lossless and an open standard. Tidal is now switching to FLAC support for its HiFi Plus tier, this seems to indicate that the platform doesn’t need MQA files either. A spokesperson for Tidal assured us that “our existing MQA catalog will continue to be available on the platform,” but did not specify how long this would continue. Anyway, current HiFi Plus users seem to have the ability to switch between the two “flavors” of Hi-Res support depending on their preferences.
Things become more important when you realize that brands making Tidal-compatible, and therefore MQA-compatible, products could also be affected. Manufacturers of hardware capable of decoding or “unfolding” MQA file streams, such as the Bluesound Node Streamer Or Cambridge Audio DacMagic 200M DAC, could be impacted if Tidal chooses to abandon MQA altogether. In short, companies will have less incentive to produce MQA-enabled software or hardware. It’s also true that the record labels themselves have the encoding tools and ship directly to Tidal, implying that it would be up to the record labels to know if and when MQA was no longer viable.
The implications go even further. In 2016, Warner Music Group has signed a license agreement with MQA to provide high-resolution music to users around the world and allow WMG artists to have their recordings delivered in high quality. WMG is far from the only company to have signed a deal, with MQA currently holding over 130 such licensing deals. The causal ripples go far beyond the shores of the particular island of Tidal.
Stuart George, CEO of Cambridge Audio, took a measured approach when asked about the recent turmoil at MQA: “Cambridge Audio always strives to give customers choice with the widest range of support for all streaming services,” he said. “Our Evo 75, Evo 150 and DacMagic 200M are all MQA compatible. It’s a shame to see MQA facing some challenges right now, so we’re watching with interest to see how things go.
What does the future hold?
One of the many business euphemisms that surfaced repeatedly while covering MQA’s issues was to talk about “restructuring.” What it could boil down to, huge financial and administrative complexities aside, is whether MQA will sell the rights to its SCL6 codec in an effort to bring the entire company back to solvency. This is a question, by the way, that might not apply if MQA Ltd. found a new buyer in the meantime.
The answer to this question, unfortunately, is tricky. Due to the complexity of company law, directors must ensure that the distribution of assets is fair to all current stakeholders, which means that parts of the business can be put up for sale without buyers having to take on other undesirable responsibilities or aspects of the business. If someone wanted to buy the rights to SCL6, for example, they could do so without having to deal with the rest of MQA, an attractive proposition for buyers but a potential risk for MQA Ltd. which could end up as a hollow shell stripped of its potentially most valuable asset.
As of this writing, we can’t be sure how Tidal will respond to news from MQA, but the switch to FLAC announced for its Hi-Fi Plus level is not good news for MQA. In fairness, Tidal hasn’t given a specific date for FLAC’s introduction, and the company’s statement that the existing MQA catalog “will continue to be available on the platform” indicates that MQA hasn’t not simply been immediately removed from service. It’s hard to escape the conclusion, however, that with FLAC now in the picture, there may not be room for two hi-res audio file formats in the long run.
There are a number of hardware manufacturers that support MQA, as listed on the company’s website, including Astell & Kern, FiiO, Sony, Cambridge Audio, and JBL (although supported products vary). For these companies, it is currently unresolved where MQA Ltd. will be, what the software rights agreements are, and whether or not the company will exist in the same form in the months and years to come. The same goes for the (undisclosed) companies that were in talks with MQA about deals for SCL6 compatible products. Again, with Tidal now willing to integrate FLAC, the incentive to stick with MQA has diminished significantly.
All of this is currently only conjecture. We can speculate on the next move of the directors of MQA Ltd., the companies that hold agreements with it and the fate of its assets and licenses, but from an outside perspective, all we can do is make educated guesses about what might happen next. Whether Tidal abandons MQA entirely or SCL6 is sold to raise funds – or even if MQA Ltd. will simply be dismantled entirely – all remains, for the moment, to be seen.
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