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TIDAL Sued for Not Paying Royalties and Fires CFO and COO

They've been hit with a $5 million dollar class action lawsuit.
March 1, 2016, 9:35pm
Image courtesy of TIDAL

It's been a turbulent week for streaming service TIDAL, which was hit with a $5 million dollar class action lawsuit and also just lost both its CFO and COO in the space of a few days.

On February 27 of last week, American musician John Emanuele, of post-rock band The American Dollar, and cinematic music licensing company, Yesh Music Publishing, which represents The American Dollar, brought a class action complaint against TIDAL for copyright infringement and underpayment of royalties, according to Music Business News.

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Jay Z, TIDAL's co-founder, is one of the defendants named in the filing, along with his eponymous holding company, Shawn Carter Enterprises. Aspiro AB, which owns and operates TIDAL and the Europe-specific streaming service WiMP, and Black Panther Bidco, a holding company owned by Shawn Carter Enterprises which purchased Aspiro (and its subsidiary TIDAL) in 2015, are also named in the suit.

In the filing, which can be read in full here, the plaintiffs (Emanuele and Yesh Music) alleged that the defendants failed to register and pay the proper royalties they owe, as pertaining to 148 musical recordings. Despite not having the proper licensing, the defendants are accused of having reproduced and distributed said recordings through TIDAL Music Service anyway.

Emanuele and Yesh said in the complaint that TIDAL pursued a "calculated business plan to avoid the costs associated with properly serving [notices of intent to obtain a license to those 148 recordings] and to retain royalties for which they have no right."

TIDAL refuted the claims made in the suit to THUMP via email. "TIDAL is up to date on all royalties for the rights to the music stated in Yesh Music, LLC and John Emanuele's claim and they are misinformed as to who, if anyone, owes royalty payments to them," a spokesperson for the company said. "As Yesh Music, LLC admits in their claim, Tidal has the rights to the Master Recordings through its distributor Tunecore and have paid Tunecore in full for such exploitations. Their dispute appears to be over the mechanical licenses, which we are also up to date on payments via Harry Fox Agency our administrator of mechanical royalties."

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The spokesperson added: "The entire catalogue in question streamed fewer than 13,000 times on TIDAL and its predecessor over the past year. We have now removed all music associated with Yesh Music, LLC and John Emanuele from the service. This is the first we have heard of this dispute and Yesh Music, LLC should be engaging Harry Fox Agency if they believe they are owed the royalties claimed. They especially should not be naming S Carter Enterprises, LLC, which has nothing to do with Tidal. This claim serves as nothing other than a perfect example of why America needs Tort reform."

THUMP got on the phone with analyst Richard Tullo of Albert Fried & Company to get his read on the suit. "[There are] two scenarios based on the accusations that are being thrown around," he said. "One scenario is TIDAL owes the artist owes money and TIDAL is not paying for some reason. The other scenario is that Tidal had paid, and the artist is due money from somewhere else based off some kind of contract the artist signed that they didn't quite understand."

Tullo added that the lawsuit might have implications on the recent news that Samsung was in talks with TIDAL about buying the service. "They don't want to buy something that's losing money presumably and then all of a sudden, turn around, and these guys are not paying their bills," he said.

The lawsuit brings into question TIDAL's self-proclaimed dedication to treating artists well. In an interview with the New York Times when the company launched, Jay Z said: "This is a platform that's owned by artists. We are treating these people that really care about the music with the utmost respect." The lawsuit referenced that intention, stating: "Ironically, when Defendant Carter purchased the TIDAL Music Service in 2015, it claimed it would be the first streaming service to pay the artists. Different owner, same game."

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The Emanuele/Yesh lawsuit also comes just as TIDAL fired two of its top executives. The New York/Sweden-based company confirmed via email to THUMP that it has terminated both CFO Chris Hart and COO Nils Juell's contracts.

According to Swedish news outlet Breakit, Hart was fired because of the issues relating to TIDAL's management of user and streaming data. This follows the embarrassing news that Kanye West's new album, The Life of Pablo, did not chart because it was limited to exclusive distribution through TIDAL, which does not share its streaming data with Nielsen Music, which is a major source for the Billboard charts.

This morning, TIDAL told The Verge that "it does share streaming data with Nielsen Music unless requested not to by an artist."

Hart had held the CFO position since 2014, and been with the company since 2012.

TIDAL has not given an official reason for either of the two departures, only offering the following statement: "TIDAL has terminated CFO Chris Hart and COO Nils Juell. As TIDAL has grown into a global operation serving 46 countries we have moved our accounting and operations team to New York while our technology team and key support staff remain in Oslo."

This recent bad news is not an isolated event: in the last year, the company has lost two CEOs, Andy Chen and Peter Tonstadt, as well as head of product Ervin Draganovic.

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