Sony Music has filed a lawsuit against Napster over allegations that the streaming service owes more than $9 million in unpaid royalties — and has continued to illegally play the songs after Sony pulled the plug on their licensing deal.
Napster — not the infamous turn-of-the-century file-sharing site but the small streaming service once known as Rhapsody — was acquired in March by Infinite Reality, a digital media and e-commerce company, for $207 million.
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But in a lawsuit filed Friday (Aug. 1) in Manhattan federal court, Sony accused the newly sold company of failing to pay its bills. The case claims Napster owed more than $9.2 million when Sony finally terminated its contract in June — but has kept on using the songs anyway.
“When companies exploit Sony Music’s sound recordings for commercial benefit without authorization, this not only harms Sony Music by depriving it of compensation, but it also reduces the incentive to invest in the creation and dissemination of new music,” the company’s lawyers write.
Despite Napster’s origins as an industry-shaking pirating service, the famous name has been reused for decades on a series of legal music services. Most recently, Rhapsody rebranded under the Napster name in 2016; it had a little more than 1 million monthly active users at the end of 2020, according to Music Ally.
Back in January, Billboard reported that Napster had been making late royalty payments to at least half a dozen distributors and record labels, sometimes by as much as a year. In June, SoundExchange filed another lawsuit against Napster over accusations of $3.4 million in unpaid royalties.
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According to Sony’s new lawsuit on Friday, Napster has failed to pay royalties to the company for over a year. By March, Sony says Napster had racked up an unpaid royalty balance of $6,787,466 across four different licensing deals.
When Napster inked the Infinite Reality acquisition deal in March, the terms of Sony’s licensing agreement gave the music giant the right to terminate its licensing agreement with Napster entirely. But the company’s lawyers say Sony waived that right in exchange for a promise by Napster to finally pay the outstanding royalty balance.
According to Sony, Napster never did so — and on June 23, the label terminated the licensing deal, meaning the streaming service no longer had any legal right to play the company’s catalog. But the lawsuit says Napster never actually removed the music from its platform and is now simply committing wholesale copyright infringement.
“Despite the termination of all of defendants’ licenses to use any of Sony Music works, defendants have continued to use and exploit SME sound recordings and music videos,” the company’s lawyers wrote. “Sony Music has identified a sample of hundreds of sound recordings and music videos that were available through Napster.”
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Friday’s case is very obviously not the first copyright battle for Napster. Shortly after Shawn Fanning and Sean Parker’s pioneering service took the country by storm in 1999, it was facing infringement lawsuits from various heavy-hitters, including Metallica, Dr. Dre and the RIAA. Those cases were quickly successful: a federal judge issued an injunction in 2001, effectively forcing Napster to shut down.
The following year, Bertelsmann announced that it would acquire the service and turn it into a licensed listening platform, but a bankruptcy judge later blocked the sale. In the years since, the Napster name has been bought by a series of owners: first by Roxio, then by Best Buy, and finally in 2011 by Rhapsody, an early music streaming service, which rebranded itself as Napster in 2016.
The lawsuit from Sony did not say how much it was seeking in damages. But under U.S. law, copyright owners can seek as much as $150,000 for every work infringed, meaning damages can quickly add up when hundreds or thousands of songs are in dispute.
In a statement to Billboard on Monday (Aug. 4), a spokeswoman for Napster said: “We have no comment on pending litigation. However, 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.”
