Earlier this year, Kanye West released his long-awaited new album “The Life of Pablo” exclusively on Tidal in February. At first, the release was meant to be a limited exclusive, but a few days later, West doubled down on Tidal, proclaiming that the album would “never ever be on Apple,” and permanently exclusive to Tidal.
However, in this instance, “never ever” only lasted a little over a month. On April 1st, “The Life of Pablo” did show up on Apple Music, as well as on Spotify and Google Play Music. That was deception, according to the lawsuit against West, Tidal owner Jay-Z and Tidal itself filed in San Francisco Monday.
“By the time Mr. West changed course and broadly released ‘The Life of Pablo,’ the deceptive marketing ploy had served its purpose: Tidal’s subscriber numbers had tripled, streaming numbers were through the roof, and Tidal had collected the personal information, credit card numbers, and social media information of millions of deceived consumers,” the lawsuit alleges.
The lawsuit further claims that West and Tidal never really intended for the album to be an exclusive. Instead, they just wanted to boost Tidal’s subscriber numbers — which indeed did get a big bump from the release. Tidal may have signed up as many as two million new subscribers thanks to the album, claims the lawsuit, arguing that this could have added as much as $84 million to Tidal’s valuation.
The lawsuit now aims to not only reimburse users for any subscription fees they may have paid as a result of West’s album release, but also change its course on one key aspect of its business: Free trials aren’t supposed to automatically convert into paid subscriptions anymore.
The lawsuit only demands this change for any trials started as a result of the “TLOP” promotion, but it points to a bigger issue: Most subscription services use what’s commonly called a “negative option” to convert free trials into paying customers.
Users have to enter their credit card number at the beginning of a trial, and then cancel before the trial period is over to not get charged for the next month. Consumers understandably don’t like this, but it’s been a very effective way to amass subscribers. In fact, insiders have pointed to the absence of a negative renewal option as one of the key reasons for the failure of Tidal’s competitor Rdio.
Any judgement that puts pressure on Tidal to change course on negative option renewals could seriously jeopardize its future growth, which may be enough of a reason for Tidal to settle.