Streaming platform Slacker owes SoundExchange nearly $10 million in unpaid performance royalties, according to a recent ruling by a federal judge, issued after settlement talks between the two broke down.
SoundExchange, which collects streaming royalties for sound recordings, sued Slacker and parent company LiveOne in June, claiming they had refused to pay millions over a five-year period. As recently as September, court documents indicated the two sides were having “meaningful settlement negotiations.”
But last week, SoundExchange played an unusual legal trump card: A pre-signed consent judgment, inked by execs at Slacker back in 2020 as part of a previous effort to get the streamer to pay its royalty bill. Under the terms of that earlier deal, if Slacker ever defaulted again, its executives agreed that a judge should enter a judgment against the company for the full sum owed.
On Thursday, Judge André Birotte Jr. did exactly that – ordering Slacker to pay $9,765,396 in unpaid royalties and late fees. He also permanently barred the company from using the so-called statutory license, a federal provision that makes copyright licenses for recorded music automatically available to internet radio companies like Slacker and Pandora at a fixed price.
Without access to the statutory license, Slacker will presumably need to negotiate direct licenses from rights holders for sound recordings, similar to what on-demand streaming services like Spotify must do.
A spokesman for Slacker and LiveOne did not return a request for comment on Tuesday. In a statement to Billboard, SoundExchange president and CEO Michael Huppe said the lawsuit demonstrated that the group “takes our role in defending fair compensation for creators seriously.”
“Despite a prior agreement, multiple promises, and repeated negotiations, Slacker and LiveOne failed to pay properly for the music – on which the companies built their business model,” Huppe said. “It is regrettable that this step became necessary, but we will not back down when it comes to protecting creators and ensuring they are well-represented and properly paid under the law.”
We Can[‘t] Work It Out
In its lawsuit, SoundExchange claimed Slacker stopped paying recording royalties way back in 2017, and that a subsequent audit revealed it had been underpaying for years before that. In 2020, the two sides entered into the repayment plan, which gave Slacker two years to pay its debts. But in the June lawsuit, the SoundExchange claimed that Slacker quickly failed to live up to the plan.
“By refusing to pay royalties for the use of protected sound recordings, Slacker and LiveOne have directly harmed creators over the years,” Huppe said at the time. “Today, SoundExchange is taking a stand through necessary legal action to protect the value of music and ensure creators are compensated fairly for their work.”
Though SoundExchange clearly had the earlier agreement as leverage, it appears the two sides tried again to work out a settlement. In early September, attorneys for Slacker asked for more time, saying that the two sides were engaged in “ongoing meaningful settlement negotiations with the expectation that a settlement would be reached.” But they said such talks had not been easy.
“The negotiations have proven to be complicated. There have been a number of offers, back and forth, and numerous emails, calls and discussions,” wrote Jeffrey A. Katz, Slacker’s outside counsel. “A final resolution appears promising but is not guaranteed. Defendants would like to remain focused on their pursuit of a negotiated resolution.”