Tidal’s Lawsuit and the Fight for Subscriber Identity

By Erika Malzberg May 16, 2016

Originally published in VentureBeat by Tien Tzuo, cofounder and CEO of Zuora.

First Prince’s entire catalog, then Beyonce’s Lemonade, and now, Radiohead. Yes, streaming music service Tidal has scored yet another big get with Radiohead’s recent announcement that they’ll stream their new album A Moon Shaped Pool on Tidal (and Apple Music too, but, notably, not on Spotify).

As Tidal continues to fight the tides in the over-saturated streaming music space, it will need all the good news it can get.

Tidal is trying to differentiate with high-quality streaming and by positioning itself as the streaming music service for artists — and as the place where true fans flock for exclusive access to these artists.

Tidal’s attempt to stand out from the crowd has been successful, but, presumably, not for the reasons it wants. In the 13 months since Jay-Z took the helm and relaunched the Tidal brand, it has earned attention over and over again — for misstep after misstep.

One of the most egregious of these missteps resulted in the current lawsuit over the “exclusive” launch of Kanye West’s latest album The Life of Pablo.

When West released TLOP in February 2016, he claimed it would be a Tidal exclusive. He didn’t imply it; it was a straight-up promise: “My album will never never never be on Apple. And it will never be for sale…You can only get it on Tidal.”

Kanye’s fans heard this clear message and responded accordingly. Within 24 hours after announcing this exclusive, Tidal took over the number one spot on the iOS App Store and more than doubled its existing subscriber base.

So, needless to say, the estimated 1.5 million new Tidal subscribers who subscribed for this exclusive were a bit teed off when, just over a month later, West released the album on all the other major streaming services like Spotify, Apple Music, and Pandora.

New Tidal subscribers who feel they were duped into purchasing their subscriptions filed a $5 million class action lawsuit on April 18 against Tidal, West, and Jay Z’s S. Carter Enterprises.

The really interesting thing about this lawsuit is that those participating in it aren’t just seeking compensation for the subscriptions they paid for but are demanding that Tidal delete the personal information it obtained as a result of these subscriptions.

The lawsuit’s demand isn’t just to delete credit card information, but all personal information. In fact, the defense is trying to make the case that this subscription information could be worth up to $84 million. Not surprisingly, the lawsuit is being led by Edelson PC, a consumer tech privacy law firm, because this personal information is what’s really of value in this transaction — and what is really at stake.

This user information is, after all, the juice that powers the subscription economy. Sure, TLOP was streamed 250 million times in the first 10 days following its release. Sure, it increased Tidal’s global subscription base to over three million subscribers. Sure, Tidal raked in some cash due to this exclusive (though it did offer a free one-month trial to new users, so many of the new subscribers didn’t actually pay for their subscription).

But the money and the sign-ups are merely transactional. What Tidal really got out of this, for the long-term, was subscriber identity information for a whole host of new subscribers — subscribers who wouldn’t have willingly handed over their personal data if they hadn’t been promised they were getting something exclusive in return.

Subscription services like Tidal are all about converting customers into subscribers and monetizing ongoing customer relationships. The goal is to use the data to understand subscribers and then use this understanding to create a compelling subscriber experience. In the subscription economy, it’s no longer about selling products, it’s about building long-term subscriber relationships and monetizing them.

Smart subscription businesses can do this by capturing personal data such as account balance, usage, demographics, social data, and more, and then monetizing these insights. For example, subscriber data might reveal that an individual Tidal subscriber is a 25-year old man from Atlanta, Georgia who is on Facebook and listens to a lot of Rihanna and whose heaviest usage occurs on Tuesday evenings. Obviously, this could be very valuable information.

And very personal information. Tidal’s questionable means of obtaining this deluge of new subscribers has rightly led to some serious questions around privacy. While the proposed $84 million valuation of this subscription information may not stand up to scrutiny, what is certain is that Tidal’s marketing ploy has brought to the forefront the idea of subscriber identity as an incredibly valuable commodity.

I can’t wait to see how it all plays out in court.

Learn more about the value of subscriber identity in Identity Fuels Your Subscriber Journey from Subscribed 2015.