Rdio Alleges Collusion In Streaming Music

When Rdio declared Chapter 11 bankruptcy in November 2015, the event marked a blight on the music industry's transition from downloads to streams. Losing $2 million each month, Rdio announced it would be selling its key assets to Pandora for $75 million.

Sony Music is still grumbling about what happened on the brink of Rdio's bankruptcy and believes it is being shortchanged. Now, Rdio wants to put Sony on the defensive.

The Hollywood Reporter has learned that Rdio has retained the prominent law firm of Winston & Strawn to investigate Sony on the antitrust front. Rdio has recently told a bankruptcy judge it has "potentially highly valuable claims" against Sony for allegedly colluding with Universal and Warner Bros. in the streaming music market. If Rdio moves forward with an antitrust lawsuit as currently being envisioned, it would be raising similar issues explored in the Justice Department's lawsuit against Apple and book publishers over the way that "most favored nation" clauses in contracts can enforce pricing floors for the licensing or sale of content.

The investigation — which entails how the major labels have communicated with each other with respect to licensing negotiations  — will do nothing to settle the simmering bad blood between Rdio and Sony, which exploded in April.

That month, Sony sued Rdio's three top executives, alleging that before Rdio declared bankruptcy, the streamer made misrepresentations, false statements and concealments in order to avoid millions of dollars in payments that had come due as well as win the right to continue exploiting sound recordings from artists including Michael Jackson, Bruce Springsteen, Beyonce and others. In court papers, Sony also has hinted at possibly suing Pandora, too, for its own involvement in the alleged fraud.

Rdio responded by pushing a judge to issue a preliminary injunction on the Sony lawsuit. On Wednesday, though, U.S. Bankruptcy Judge Dennis Montali issued a ruling denying any restraining order.

Meanwhile, as the spoils of the Rdio asset sale get divided, Sony wants more than the five percent it has been earmarked under a reorganization plan. Sony alleges that the bankruptcy has been set up to enrich insiders like Rdio chief executive officer Anthony Bay. With a $12.4 million claim, Sony is Rdio's largest unsecured creditor. Additionally, Sony subsidiary Orchard, which specializes in digital licensing for independents, has a $4.5 million claim and is Rdio's third-largest unsecured creditor. Sony aims to leverage its $17 million stake to block the plan for distributing the Pandora money.

Rdio is fighting back. The debtor not only asserts that Sony's claims for "unearned" minimum guarantees under the streaming licensing deals are unwarranted, but Rdio's lawyers are now looking to possibly sue Sony.

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