Jay-Z’s $56 Million Problem

Jay-Z is suing the former owners of his streaming music service, Tidal, claiming the previous owners inflated the number of subscribers and making the platform look more viable and profitable than it is in reality.

Jay-Z has owned the streaming service for about a year and has seen a number of disappointing events in that time, including albums posted to the allegedly exclusive service being reposted on other sites within hours after release and a series of executives leaving their positions either by choice or by force.

On Thursday, Tidal’s legal team served notice to Schibsted ASA, the Norwegian company that previously owned the platform, accusing Schibsted of inflating the subscription numbers prior to Jay-Z’s purchase of the service last year.

“It has become 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,” Tidal’s representatives said in a statement released to various media outlets Thursday afternoon. “As a result, we have now served legal notice to parties involved in the sale.”

None of the reports say just how many subscribers were actually paying customers at the time of the sale, however.

Among other damages, Jay-Z and his team are looking to recoup some of his initial $56 million investment, Bloomberg reports.

Mr. Beyonce has tried to position Tidal as a major competitor to iTunes since he took over a year ago, promising exclusive releases from a stable of high-profile performers including himself, his wife, Rihanna, Prince and others. Almost immediately, there’s been a serious revolving door problem with leadership within the company, to say nothing of user complaints and money problems. Earlier this month, there was an attempt to sell the streaming service to Samsung, a deal which later fell through. The same day the news broke about the lawsuit, it was also reported by Page Six that Tidal was looking to expand its services to include movie streaming to make it competitive with Netflix and Hulu. Page Six also reported that Tidal executives were in talks with the Weinstein Co. and Irv Gotti to produce original content for the site.

Currently, Tidal has some 3 million paying subscribers, a rate that shows growth but does not keep up with competitors—Spotify has some 30 million subscribers from which it collects monthly fees, while Apple Music has some 11 million subscribers.

Anders Rikter, a spokesperson for Schibsted, tells Bloomberg his company did nothing wrong and did not inflate Tidal’s subscriber base before last year’s sale.

“We disagree with the accusations in the letter and any potential claims,” Rikter said. “We would like to point out that the company was listed on the stock exchange with everything that entails regarding transparent financial reporting.”

The moral of the story? If you’re going to plunk down millions of dollars to try and differentiate your service from others that already exist and are profitable, maybe you leave the “yes men” at home and hire a different team of lawyers specializing in doing their homework to make sure you don’t have any reason to complain about losing your initial investment. It might be time for Jay-Z to cut his losses.