At an event in New York on Monday, Madonna, Beyonce, Kanye West, and 13 other performers announced they had become co-owners of Tidal.
The service launched last October, but was recently bought by rapper Jay Z.
It is hoping to compete with the likes of Spotify, Deezer and Google Play.
However Tidal offers 25 million music tracks, fewer than the 30 million offered by many rival services.
As well as a standard subscription for $9.99 a month, Tidal offers a "high fidelity" option for $19.99, which claims to deliver better sound quality.
Singer Alicia Keys spoke on behalf of the artists as they all lined up on stage at Skylight at Moynihan Station in Manhattan.
Describing the event as a "graduation", she said the artists hoped Tidal would alter musical evolution.
"So we come together before you on this day, March 30th, 2015, with one voice in unity in the hopes that today will be another one of those moments in time, a moment that will forever change the course of music history."
Their mission, she said, goes beyond commerce and technology.
"Our intent is to preserve music's importance in our lives,'' she said.
Notably, the majority of the company will be owned by artists, a symbolic move in a business where musicians often have little control over how their work is distributed and consumed.
Jay Z's strategy will include encouraging artists to lobby their labels to give Tidal new music a week in advance of other services, giving it a short window of exclusivity.
He told Billboard: "We didn't like the direction music was going and thought maybe we could get in and strike an honest blow.
"Will artists make more money? Even if it means less profit for our bottom line, absolutely. That's easy for us. We can do that. Less profit for our bottom line, more money for the artist; fantastic."

Free-to-use cash machines, banks on wheels and the use of local Post Office branches could all be solutions.
The move expands a former voluntary agreement to assist vulnerable customers when towns and villages become bank-free.
But there will be no punishment if banks fail to provide alternatives.
Banks, the government and consumer groups have signed up to the new protocol, which will be reviewed independently in a year.
Business Secretary Vince Cable said that banks had a duty to ensure that vulnerable customers, small businesses and those in rural communities should have access to counter services to conduct their financial affairs.
However, many residents of towns and villages have found that they have to travel to the nearest major conurbation in order to get to a bank branch.
Banks should now consider the proximity of alternative branches before a closure - although proximity can be very different, depending on the mobility of customers, ranging from young car drivers to older people reliant on public transport. The age profile of the branch's customers will be part of the review.
Individual banking institutions should come to arrangements with the Post Office to allow counter services for current account customers, the government has said.
A system that allows customers to compare the suitability of current accounts from different banks is also being unveiled.
Comparison website Gocompare.com will run a government-backed system that allows customers of five banks to download their last 12 months of statements to judge whether they could get a better deal elsewhere.
"The initiative will allow people to compare accounts based on their needs and could help them save money if they switch," said Richard Lloyd, executive director at consumer group Which?.
"However, it will only be a success if the banks play their part in making people aware of the service and the benefits of switching, and if it is rolled out across all current account providers."
Initially, it will only be available to customers of Barclays, HSBC, Lloyds, RBS and Santander.
Only 6% of current account customers switched provider in 2014, despite the system becoming quicker and easier.
Some of the biggest names in entertainment have re-launched the music subscription service Tidal, which they are billing as the first artist-owned platform for music and video.
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Banks must investigate alternative arrangements for customers before closing the last bank in town, under a new agreement.