(Bloomberg Opinion) -- The Norwegian government is investigating rapper Jay-Z’s music streaming service, Tidal, for the alleged manipulation of streaming numbers. Whether or not the company is guilty — it denies everything — the industry in which it operates certainly has problems around dubious audience figures. Facebook Inc. and Twitter Inc. have faced similar accusations of fake accounts and questionable video viewing data.
The Norwegians are interested in Tidal because it’s almost a local company. Jay-Z bought its parent firm, Aspiro, in 2015 from Norwegian media company Schibsted ASA. The hip-hop artist’s aspiration was to create an alternative to the industry leader, Sweden’s Spotify Technology SA, with better audio quality and higher royalties to musicians. The project hasn’t gone too well, although Jay-Z has done okay. In 2017, Sprint Corp. bought one-third of Tidal for $200 million, more than three times the $56 million the singer paid for the entire company.
Frequent management changes, the failure to secure exclusive rights to new releases from top artists, and slow subscriber growth have relegated Tidal to the status of minor competitor. In June, the market research firm MusicWatch estimated Tidal had 3 million subscribers, including trial accounts — less than 4 percent of Spotify’s paying subscriber count.
Tidal had reported reaching the 3-million mark about two years prior, but its numbers have been disputed. In 2017, the Norwegian newspaper Dagens Naeringsliv first alleged that Tidal was massaging them. Jay-Z himself had already accused Schibsted of selling him a firm with an inflated subscriber base. Neither allegation has been reviewed by a court.
The current investigation, however, isn’t about subscriber numbers but about streaming data. In May 2018, Dagens Naeringsliv reported, based on what it claimed to be a massive data dump from Tidal, that the company had exaggerated the streaming statistics for two albums, “Life of Pablo” by Kanye West and “Lemonade” by Jay-Z’s wife, Beyonce. Both were released in 2016, and Tidal said they were streamed 250 million times and 306 million times, respectively — a surprising number given its relatively small subscriber base.
There is a motive for boosting figures (even if this turns out not to have been happening at Tidal). Streaming companies put aside a certain share of their subscription revenue to pay artists. This pool is divided between musicians according to their share of total streams. If, for example, Kanye West’s listener numbers rose sharply, he would receive a bigger payout at no extra cost to the streaming service, but rather at the expense of other artists. That could potentially convince him that an exclusive deal with a streaming company would be a good idea.
These types of exclusive agreements have fallen out of favor in the industry, but even in their absence, a streaming service will still want to make sure the biggest stars are happy with how much money they make. Artists often complain about the size of their streaming royalties and periodically refuse to make their music available. Taylor Swift’s boycott of Spotify lasted three years.
At the same time, lesser-known artists can buy streams, much as it’s been possible for aspiring stars to buy social media followers. In 2017, two Danish journalists succeeded in placing an openly terrible song on Spotify, paying an intermediary for 10,000 streams and avoiding detection by the service’s fraud squad. The intermediary in question is still around, though some of its other clients have had their music removed. Spotify is aware of various fraudulent schemes and is engaged in the usual Whac-A-Mole efforts against them.
Last year, a Bulgarian scammer (or group thereof) was reportedly caught making money from fake Spotify playlists to which 1,200 fake premium accounts “listened” millions of times (a song is considered played on Spotify if someone has listened to at least 30 seconds of it).
One doesn’t need to dive into the Dark Web to find plenty of services offering to generate plays for wannabe superstars. They offer “completely legal” streams at a few dollars per thousand plays or guarantee the placement of a song on a sought-after playlist, even though streaming services’ terms of use forbid this. In other words, the streaming companies’ algorithms can be gamed sometimes. Detecting potential royalty fraud in the streaming industry is a relatively new area, and it’s not an exact science.
Since the 2016 election of Donald Trump, social media companies such as Facebook, Instagram, Twitter and YouTube have been under pressure to eradicate fake accounts. They’ve been issuing regular estimates of the number of them. Streaming apps aren’t used in presidential campaigns, so much less is known about fraudulent activity in the industry. That certainly needs to change. Data manipulation is a problem across all modern tech platforms.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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