Sony Music has sued streaming service Napster and its new owner Infinite Reality over unpaid royalties that now top $9.2 million. It is suing for both breach of contract and copyright infringement, because - as well as not paying its bills - Napster has continued to stream Sony’s recordings even after the major cancelled its licences in June.
“This is an action to recover over $9.2 million in past-due royalties and fees owed”, the lawsuit begins, “as well as to recover damages for defendants’ deliberate infringement of Sony Music’s copyrighted sound recordings”. Napster has been failing to make payments to the major, the lawsuit adds, while “continuing to collect subscription fees from their millions of paying users”.
There were reports in January that tensions were building between the music industry and Napster over unpaid royalty bills, with a number of record labels and music distributors rumoured to be considering pulling their tracks from the streaming platform. However, it’s possible that Infinite Reality’s purchase of Napster in March initially bought the company a little more time to make those payments.
In its lawsuit, filed with the courts in New York, Sony says that Napster hasn’t been paying royalties that are due under its licensing deals with the major for over a year now. But in November, Sony became aware of Infinite Reality’s plans to buy the streaming service and initially hoped that deal might fix the problem.
Technically the change in ownership meant Sony could terminate its licences with Napster, even without the payment issues, because of a ‘change in ownership’ clause in its licensing deals.
However, it agreed to waive that right to terminate in return for a commitment that Napster would clear its debts to the major - by that point $6,787,466 - in four installments beginning fifteen days after the completion of the Infinite Reality acquisition.
That takeover completed on 25 Mar meaning the first payment was due on 9 Apr. But, Napster “not only failed to make these payments” in relation to the debt, the lawsuit states, but also failed to make its monthly payments for newly streamed tracks, meaning the debt got bigger.
That prompted Sony to cancel its licences with Napster in June, meaning the streaming service could no longer legally stream its recordings. But “despite the termination of all of defendants’ licences to use any of Sony Music works, defendants have continued to use and exploit SME sound recordings and music videos through the Napster service without authorisation since 23 Jun”.
The Napster brand is still most associated with the long defunct file-sharing network that first used the name in 1999, but it has been a licensed digital music platform since 2003. Initially a subscription-based download platform, it morphed into a streaming service, and later added a B2B element powering other companies’ digital music ventures.
It has changed ownership multiple times over the decades, with recent owners promising to transform Napster into a hub of all things VR and Web3, though it has mainly remained as a B2B digital music provider with a consumer-facing streaming service that everyone forgets exists. Although it might now get to enjoy a slightly higher profile as the streaming service that doesn’t pay its bills.
Unless, of course, it can quickly settle the debts and lawsuits. A spokesperson told Billboard, “We deeply value our relationships with all of our partners. We remain committed to rebuilding Napster’s relationships with all of the major labels and are hopeful for a swift and amicable resolution”.
