Sony Music Hits Napster Parent with $45 Million Lawsuit Over Royalty Fraud
Sony Music Entertainment (SME) has filed a lawsuit against Rhapsody International, the parent company of the streaming service Napster, seeking $9.2 million in unpaid licensing fees and royalties, as well as a potential $36 million in damages for copyright infringement. The lawsuit, filed on August 1 in Manhattan federal court, alleges that Napster failed to make royalty payments for over a year while continuing to stream music from Sony’s catalog.
Background of the Dispute
In March, Web3 startup Infinite Reality acquired Rhapsody International for $207 million. At the time of the acquisition, Rhapsody reportedly owed over $6.5 million to Sony and its subsidiaries. The acquisition triggered a clause in the licensing agreements between Napster and Sony Music Entertainment, allowing Sony to terminate the contracts. However, Sony agreed not to exercise this right if Rhapsody adhered to a four-part payment plan, with the first three installments due within two months.
According to the lawsuit, Rhapsody has failed to make any payments on its outstanding balance or additional licensing fees since the acquisition, despite continuing to collect subscription fees from millions of users. In May, Sony notified Rhapsody of its breach of contract, and in June, Sony terminated its licensing agreements with Napster.
Allegations of Willful Infringement
Despite the termination of the licensing agreements, Napster has continued to make Sony’s music catalog available for streaming. Sony’s lawsuit describes this as willful infringement and is seeking damages of $150,000 per infringed work. Based on a list of 240 songs included in the court filing, this could amount to $36 million in damages.
History of Payment Issues
This is not the first time Sony Music has taken legal action over unpaid royalties. In 2022, Sony sued Triller under similar circumstances, claiming the shortform video app owed millions in missed royalty payments. Triller settled the following year and was forced to pay $4.5 million. Recent reports indicate that Napster has been accused of making late royalty payments by at least half a dozen other distributors and record labels, as well as by SoundExchange over unpaid royalties.
Napster’s Tumultuous History
Napster originally launched in 1999 as a peer-to-peer file-sharing platform that quickly became synonymous with music piracy. The site was shut down in 2001 after being sued by the Recording Industry Association of America. Best Buy acquired Napster in 2008 and sold it to Rhapsody International in 2011. Rhapsody, which operated its own streaming service, rebranded as Napster in 2016. Since then, Rhapsody International has changed hands multiple times, being acquired by a London-based virtual reality live music platform in 2020, blockchain firm Algorand in 2022, and most recently by Infinite Reality.
Conclusion
Sony Music Entertainment’s lawsuit against Rhapsody International highlights ongoing challenges in the music streaming industry related to royalty payments and licensing agreements. As the case unfolds, it will be closely watched by industry stakeholders and could have significant implications for the future of music streaming and copyright enforcement.
Source: Sony Music Sues Napster Over Missed Royalty Payments, https://pitchfork.com/news/sony-music-sues-napster-over-missed-royalty-payments/
