As it moves forward with its bankruptcy proceedings, the company, which has agreed to sell its assets to competing service Pandora for $75 million, has retained the well known law firm Winston & Strawn to investigate Sony's communications with other record labels and how that may have influenced music licensing negotiations.
The bad blood between Rdio and Sony Music began back in April, when Sonysued three Rdio executives alleging that the company withheld millions of dollars of payments leading into its bankruptcy filings along with alleging non-payment of minimum guarantees. Rdio responded to the claims by saying that it may sue Sony for what it sees as "anti-competitive conduct" by Sony along with its subsidiary Orchard:
"In particular, the Debtor believes that Sony and Orchard have engaged in anti-competitive conduct to fix and control prices and unreasonably restrain trade for the licensing, marketing, and use of music by services, like the Debtor, for the digital streaming of music to consumers worldwide," states a Rdio motion aimed at compelling the production of documents from Sony. "For example, one of the Debtor’s preliminary antitrust theories relates to what are commonly known as Most Favored Nations clauses ('MFNs') which play a major role in Sony’s agreements with Rdio and in Orchard’s agreements with Rdio."
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The 'MFN' clause is what was at the center of the Department of Justice's case against Apple and book publishers that saw an antitrust case brought against Apple alleging the company conspired to raise the price of e-books in violation of the Sherman Act. As a result of the case, Apple was forced to pay a $450 million settlement. For its part, Sony issued the following response in regards to the threat of a lawsuit and reference of the 'MFN':
Addressing the law review article that discussed the DOJ's case against Apple and the book publishers, Sony says that entailed a "completely different type of MFN — an MFN in which aseller promises to give a buyer the best price it offers anyone else."
Underneath the legal heavy details of the accusations brought by Rdio and the surrounding legal battles, this story raises an interesting question as to how much pressure the record labels are feeling from the streaming business and the steps they may take to ensure that they still control their industry.
Whenever lawsuits like Rdio v. Sony Music pop up, they serve as a friendly reminder that back in the late 90s/early 2000s, when the door was wide open for all of the major labels to get ahead of or work with tech companies and usher the recording industry into the future, instead of embracing change and progressiveness they fought, first, digital downloads and then later streaming. Oops.
by @brokencool, T.Dot's own
Photo Credit: Instagram