Napster and Sonos Face Legal Action Over Unpaid Music Royalties
Napster, once a symbol of music piracy in the early 2000s, is now facing a legal challenge as it partners with Sonos in a copyright dispute. The lawsuit, brought by SoundExchange, claims that both companies owe over $3.4 million in unpaid royalties for their involvement in the Sonos Radio service. The financial dispute began when payments ceased around May 2022, following Napster’s acquisition by Hivemind and Algorand, which focused on web3 technologies. The issue came to light during an audit by SoundExchange in 2023, which found that Napster and Sonos had failed to meet their payment obligations.
According to the complaint, the companies’ partnership on the Sonos Radio service, which launched in April 2020, initially went smoothly with Napster serving as the authorized agent. However, payments stopped around May 2022, leading to a significant backlog of owed royalties. The audit by SoundExchange revealed that the partnership had not only failed to make required payments but also that their reporting system had completely broken down. SoundExchange’s report states that the companies owe more than $3.4 million, including interest and late fees, which have continued to accumulate since the last payment.
As of April 2023, Sonos has transitioned to using Deezer as its music provider for the radio service, which appears to have resolved the royalty issues. However, SoundExchange maintains that it is still owed a substantial sum, with the complaint noting that the companies have not fully settled their obligations. The lawsuit lists two counts: one for underpayment of statutory royalties and another for non-payment, both of which could result in additional financial penalties. SoundExchange is seeking full compensation for the unpaid royalties, emphasizing the importance of meeting contractual obligations in the music industry.
The case highlights the complexities of managing royalty payments in the digital age, particularly when dealing with large-scale distribution platforms. For Napster, which has been repositioning itself under the ownership of Hivemind and Algorand, the lawsuit could be a significant setback. The company’s focus on web3 technologies and blockchain may have influenced its financial and operational decisions, which ultimately impacted its ability to meet its obligations to copyright holders. Despite the switch to Deezer, the legal repercussions of the unpaid royalties remain, presenting a challenge for both companies as they navigate the ongoing litigation.
This legal action serves as a reminder of the critical role that royalty management plays in the music industry. SoundExchange’s pursuit of full compensation underscores the seriousness of the situation, with potential implications for the companies involved. As the case moves forward, it will be essential to monitor the outcomes, as they could set precedent for similar disputes in the future.