SoundExchange Sues Muzak for Underpaying Artists

SoundExchange Sues Muzak for Underpaying Artists

WASHINGTON, DC – April 2, 2015 – On behalf of artists and rights holders, SoundExchange has filed a lawsuit against Muzak, a wholly-owned subsidiary of Canada’s Mood Media Corporation, for underpayment. This lawsuit arises from Mood Media’s attempt to acquire new music services and pay for sound recordings at older, below market rates that were intended for a very limited set of companies. SoundExchange issued the following statement from Michael Huppe, president and chief executive officer, SoundExchange:

“Muzak is playing a shell game to cheat artists and rights holders out of royalties. It is bad enough that a handful of legacy services are permitted to pay below market value for the music at the heart of their business; but with this latest move, Muzak adds insult to injury by attempting to extend this unfair rate to newer, ineligible services.

“Muzak’s attempt at gaming the system highlights the ineffectiveness of having different rules and rate standards for music service companies. It gives older companies an unjustified competitive advantage, and leaves the door wide open for attempts at abuse.

“We hope this litigation can bring a quick and proper end to Muzak’s unlawful practices so that artists and rights holders are properly compensated when their creative work is used.”

Technical background on the case

The passage of the Digital Millennium Copyright Act of 1998 (DMCA) set forth under the law that most subscription services (e.g. those services that deliver music content to cable and satellite television providers) would have their statutory rates set by a fair market value standard (i.e. willing buyer, willing seller). When the DMCA was passed, a small handful of “pre-existing” services, including Muzak and their provision of music to Dish Network, were grandfathered into an outdated standard for setting royalty rates – a standard that frequently results in artists and labels being paid less than a fair rate.

In 2011, Muzak was purchased by Mood Media who, in turn, also purchased DMX, a Texas-based company that also provided music for cable and satellite television networks, including DirecTV. DMX had previously been licensing music under the regular fair market standard. In 2014, Mood Media moved DMX’s cable and satellite music service contracts (including DirecTV) to Muzak, thereby converting a large part of DMX’s former business into a faux “pre-existing” service and dramatically slashing what it paid for the use of the music it was providing.