Fight Over Sony Music's Streaming Income May Be Headed to Appeals Court

19 Recordings is challenging a judge's recent decision to dismiss a claim that Sony breaches it duties by treating streamed music a certain way.
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On Monday, an attorney for an American Idol-affiliated record company asked a federal judge in New York for permission to take a dispute over streaming income for artists such as Kelly Clarkson, Clay Aiken and Carrie Underwood to an appeals court.

19 Recordings sued Sony Music in February 2014, and among the plaintiff's claims was that streaming music was being treated as "sales" or "distributions" rather than as "broadcasts" or "transmissions." By accounting for income off of platforms like Spotify this way, Sony was paying over much less in royalties than was allegedly due.

The lawsuit alleges both a breach of contract and a breach of the duty of good faith and fair dealing.

In March, Sony couldn't get the judge to toss the claims, but then the record giant asked for reconsideration, and earlier this month, New York federal court judge Ronnie Abrams decided to dismiss as unsupported 19's claim that Sony made an accounting that was in bad faith.

While the breach of contract claim survives — one that allegedly amounts to as much as $3 million in damages — 19 now wants the judge to reconsider once again. Judge Abrams might not want to seem wishy washy, however, so 19 is requesting in the alternative that it be allowed to file an interlocutory appeal. If the judge agrees, it would mean that 19 would attempt to get the 2nd Circuit Court of Appeals to weigh in on whether Sony has, in 19's words, "unfettered discretion to choose between two different classifications, and, thus, two different royalty structures without any regard for the actual structure of the exploitation."

Any appellate directive on this issue might be meaningful for recording artists as streaming continues to make its way towards being the dominant avenue by which consumers enjoy music.

The request also comes just as The Verge has leaked the contract between Sony and Spotify. The digital publication highlights how Sony got a $25 million advance for the first two years under the contract and questions whether the money is being put into the pot for artists or being kept by Sony without being shared. Sony also has most favored nation clauses and a fairly intricate system for calculating how much money Spotify turns over every time someone listens to a stream.

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