Rhapsody Facing Class-Action Lawsuit Over Royalty Payments

The lawsuits against streaming companies have been coming fast and loose in the past six months and Rhapsody is the latest find themselves in the crossfire. Cracker frontman David Lowery, who filed a similar class-action suit against Spotify, is suing the streaming veteran along with co-plaintiffs and fellow songwriters David Faragher and Victor Krummenacher for infringement of mechanical royalties.

Lowry and Krummenacher have a history together as members of the same band, Camper Van Beethoven, though he did eventually form Cracker on his own.

"To quote John Goodman in The Big Lebowski, 'Am I the only one who gives a shit about the rules?'." Lowery says, referring to the subject of mechanical royalties via Billboard. "This is a massive, widespread problem. If I wanted to make a lot of money, I would have done it as a personal lawsuit. I want to get this cleaned up."

The new suit is similar to that filed against Spotify. The plaintiffs are accusing Rhapsody of willfully not paying mechanical royalties and are seeking up to $150,000 per work.

In the filing obtained by Digital Music News, the plaintiffs allege that Rhapsody knowingly infringed for quite some time.

"Rhapsody values the expediency and financial benefits of wholesale copyright infringement over the cost associated with obtaining the appropriate license," it reads.

What makes this case a little different is that the Harry Fox Agency (HFA), the company responsible for mechanical royalties has been sending retroactive NOIs to artists, dating back to 2005, which could indicate willful intent, though that will be decided in the months ahead.

Rhapsody can ill afford to have this massive suit go against them for the maximum penalties in court. In recently released financial documents, their losses increased to $35.5 million in 2015, though revenue increased by 64 percent. The company has been growing its user base, but many have joined as a part of its lower paying mobile bundle subscriber packages.