Investors Deserve a Standard for Measuring Music Service Subscribers

“Today, Spotify CEO Daniel Ek officially announced that the streaming service has hit the 30 million paying subscribers.”

Digital Music News.

Spotify “officially” announced today that it has 30 million paying subscribers.  What does “officially” mean?

I wonder if that’s like its announcement that it pays 70% of its revenue to rights holders–except when it doesn’t as David Lowery’s class action and other challenges to Spotify’s arithmetic credibility have revealed.

How do we know that Spotify has 30 million subscribers?  Because Spotify’s CEO says so.  Moral hazard much?  Isn’t that the same guy who claims to be the savior of the music industry but is underpaying songwriters to the tune of millions of dollars?

The ability of advertising supported media to deliver a reliable audience is hardly news, so it is hardly news that someone figured out that these numbers need to have some independent third party auditing those statements.

The Alliance for Audited Media is just such an independent third party.  AAM describes itself:

The Alliance for Audited Media connects North America’s top advertisers, ad agencies, media companies and platform providers. Our clients stand for trusted media analysis across all brand platforms—print, web, mobile, email and more—to make smart decisions. AAM delivers insightful, audited cross-media metrics that matter. We are one of the world’s most experienced providers of technology certification audits to industry standards established by the Interactive Advertising Bureau, Media Rating Council and Mobile Marketing Association. As a third-party auditor, we deliver media assurance via our verification and information services and provide solutions that empower media professionals to transact with greater trust and confidence.

It would be helpful for investors to know exactly what a “subscriber” means to Spotify (and other DSPs for that matter).  If the user is “subscribing” to an ad supported service, such as Spotify’s dearly beloved “freemium” service with Ads by Google, what does that mean?  Does it mean that a user has paid their bill for 90 consecutive days, or does it mean that the user is on their fourth 90 day free trial?

Given complaints by experts like WPP’s CEO Sir Martin Sorrell that click fraud and false billing is rampant on YouTube, shouldn’t investors expect to have subscribers audited by an impartial source?  (Harvard Business School Professor Ben Edelman called it back in 2009 with his prescient “Toward a Bill of Rights for Online Advertisers“.)

In this particular context, “investor” takes on a broader meaning.  Spotify and its defenders routinely ask that artists and songwriters “trust” but “don’t verify” to help Spotify grow–that is, to “invest” in Spotify’s future by taking a low royalty today for a burger on Thursday.  Now that class action lawsuits from songwriters are motivating the company to cover its tracks, it’s starting to look like Spotify is asking for a burger today for a dollar on Thursday.

It’s time that all investors in music services got independent verification of exactly what these subscriber numbers actually mean.

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