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Fitness firm admits music licensing challenges are a risk in its pre-IPO filing

By | Published on Thursday 29 August 2019

American fitness firm Peloton has admitted that the challenges and complexities of music licensing are a key risk to its business. Which is both a dig at the music industry, but also an admission that without some top recognisable tunes its fitness videos aren’t up to much.

Peloton makes fitness machines that come with screens via which users can access workout videos. There has already been a lawsuit involving more than a dozen music publishers which alleges that those videos contain unlicensed songs. Peloton countersued in April, mainly citing competition law arguments.

The company is now heading for IPO, which is why it is publishing documents containing frank admissions of its own weaknesses. And that includes the fact that the major record companies could hold the firm pretty much to ransom in future licensing deals given how many top hits they control. Plus, on the songs side, licensing music is famously tricky, meaning there is always a risk of using unlicensed works and being liable for copyright infringement.

Peloton’s pre-IPO filing states: “Given the high level of content concentration in the music industry, the market power of a few licensors, and the lack of transparent ownership information for compositions, we may be unable to license a large amount of music or the music of certain popular artists, and our business, financial condition, and operating results could be materially harmed”.

It then adds that, despite “expending significant resources” on music licensing, the complexities of music rights ownership and song licensing meant that it could never be absolutely certain it wasn’t “infringing or violating any third-party intellectual property rights” with the music already featuring in videos on its platform.

Still, despite that and various other risks, plus the $196 million in losses the company made in the last year, you should definitely all invest! Pre-IPO filings are always fun reading.