Just days removed from announcing that Tidal has 3 million paying subscribers, Jay Z probably doesn’t have any buyer’s remorse over his acquisition of the music streaming service. But he does have a bone to pick with its original owners.
The music mogul is threatening to file a lawsuit against Tidal’s former majority owners, the Norwegian media company Schibsted and the venture capital firm Verdane, alleging that they made false claims about Tidal’s financial condition and misrepresented how many subscribers the streaming service had. At the time of the purchase, Jay Z (born Shawn Carter) said he was given to understand that Tidal had 540,000 paying subscribers, a number he claimed was “significantly” exaggerated.
Carter reportedly wrote a letter demanding Schibsted pay back $15 million, which amounts to more than one-quarter of what Carter and a team of other investors paid for Tidal last winter.
“The growth in our subscriber numbers has been even more phenomenal than we’ve previously shared,” a Tidal representative said in a statement.
“It became clear after taking control of Tidal and conducting our own audit that the total number of subscribers was actually well below the 540,000 reported to us by the prior owners. As a result, we have now served legal notice to parties involved in the sale. While we cannot share further comment during active legal proceedings, we’re proud of our success and remain focused on delivering the best experience for artists and fans.”
At the time of the transaction, industry observers agreed Carter and his team were getting a deal. Tidal had recently launched itself in the U.S., and it had agreements in place to export its service to a number of countries around the world. A Billboard report observed that the $57 million Carter and his fellow investors paid was far less than they should have paid.
Yet there is some uncertainty surrounding the numbers in Carter’s claim. The venture majority-owned by Schibsted and Verdane was a company called Aspiro, which at the time of its acquisition was publicly traded in Sweden. Aspiro regularly disclosed information about how well Tidal was doing, and in a report detailing its progress in the fourth quarter of 2014 that was released in February of last year, the firm pointed out its music services, which encompassed not only Tidal but also a music and video service called WiMP, had 500,000 paying users, down 12,000 from the previous quarter.
Aspiro also made no effort to hide the fact it was in dire financial straits. Last year, the company disclosed it did not have enough cash on hand to get through 2015 and that it would need “significant capital injections” and “unprecedented” subscriber growth just to survive.
While Carter and company have managed to pull off that unprecedented part, thanks largely to fans’ desire to hear records by Rihanna and Kanye West, it seems like their demand for partial recompense are falling on deaf ears. “We are unsympathetic to the letter and its requirements,” Schibsted’s communications director Anders Rikter told the Swedish outlet Breakit. “It was a public company that was acquired.”