Spotify is one of the most dominant forces in the music industry but they’re being accused of stealing a Canadian company’s trade secrets to build their ad platform.
According to Variety, VoxTonePRO are alleging they were holding meetings in 2016 and 2017 where Spotify executives were promising a partnership to get their hands on the company’s trade secrets.
In the report, it says the company ended up creating an automated platform allowing advertisers to build audio spots at much lower costs. Spotify allegedly expressed interest before cutting off discussions in May 2017.
In September of that year, the streaming service introduced their Spotify Ad Studio allowing companies to create automated ads through cheaper and more efficient methods than they previously had.
VoxTonePRO has filed a lawsuit saying this is a straight-forward rip of their product.
“Because Spotify needed a solution for a high-volume audio ad creation service, it took VoxTonePRO’s trade secret information to build Ad Studio’s back-end audio ad creation system,” the suit alleges. “Spotify needed a scalable, cost-efficient, self-service online application that generates audio ads with voiceover narrations, music and/or sound effects, and VoxTonePRO provided the solution.”
The company’s founder and CEO Nadeem Mughal initially pitched the idea to the streaming service in January 2015 but conversations didn’t go anywhere.
Then in August 2016, the streaming service hired Derek Kuhl to create a self-serve ad platform.
According to the complaint, Kuhl ended up contacting Mughal in November 2016 for a meeting at the company’s New York headquarters.
At the meeting, everything was intending to stay confidential and a detailed explanation of the ad service was given.
“Mr. Kuhl took notes throughout Mr. Mughal’s presentation,” the suit states. “During the meeting, Mr. Kuhl and Mr. Mughal also discussed financial terms of the partnership, including revenue share, licensing fees, or pre-paid fee structure.”
Kuhl also allegedly ended up gaining access to their backend systems. As discussions continued a partnership appeared to be a sincere interest of Spotify’s.
Then, in May 2017 the company were told that Spotify is moving “full speed ahead building out other aspects of the platform and don’t have the bandwidth to onboard new partners.”
A few months later, the streaming site’s ad service was ready and as of 2019, accounts for about 30 percent of their ad revenue.
Spotify has not yet commented on the lawsuit or allegations.
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