Sony Music has filed a lawsuit against former executives of the now-defunct music streaming service Rdio, claiming that they defrauded Sony for millions in licensing fees in its sale to Pandora.
After years of struggling, Rdio declared Chapter 11 bankruptcy and sold its assets to Pandora for $75 million last November. According to Billboard, the company was losing $2 million each month and had more than $190 million in secured debt and about $30 million of unsecured debt. However, the company had a content agreement with Sony that came to fruition when Rdio first opened back in 2010. The deal allowed the service to stream popular artists like Michael Jackson, Bob Dylan, Beyonce and more.
Sony claims that Rdio was inconsistent with the agreement and unable to make payments, and owed the company a $5.5 million minimum revenue guarantee by the end of 2014. Rdio executives allegedly approached the major label about renegotiating the content agreement and/or deferring the date of payment, with Sony eventually agreeing to an interim extension. However, they were unaware that Rdio was in the process of negotiation with Pandora and planning to file for bankruptcy, claiming that they did not speak of these proceedings as to not be required to pay the owed $5.5 million.
In addition, Sony claims that one day prior to Rdio making its deal with Pandora, a renewal amendment was made that gave Rdio the right to sound recordings through March 31, 2017. Read the allegation below.
“A material provision of the Renewal Amendment was Rdio’s obligation to pay SME $2 million on Oct. 1, 2015 — the day after the Renewal Amendment was executed,” continues the lawsuit. “This presented a dilemma for Rdio: the Pandora deal would be jeopardized either upon Rdio’s taking $2 million in cash out of its business, or upon Rdio failing to make the payment to SME and putting its ongoing access to SME’s content at risk.”
The lawsuit primarily targets three specific former Rdio executives: CEO Anthony Bay, general counsel Elliott Peters and Senior VP in charge of content licensing Jim Rondinelli. Sony is asserting claims of fraudulent inducement and unjust enrichment, and is livid over the $5.5 million it has not received from the 2010 deal as well as the $2 million not received under the renewal agreement.
Sony is no stranger to partnerships. Just last month, the mega label announced deal for a paid subscription service with Soundcloud and has teamed up with numerous other streaming services including Spotify. However, they are insistent that Rdio has taken advantage of them and are now seeking out the compensation they deserve.
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