Bankrupt Rdio wants Sony Music investigated for collusion

Rdio, the US music streaming service that went bankruptlast November and had its key assets purchased by Pandora, is taking the fight back to Sony Music.

It is pushing for an investigation of Sony Music over collusion issues, claiming that it made secret deals with Universal and Warner over licensing issues in the streaming market. It has hired prominent law firm Winston & Strawn to take the major music company on.

The latest charges are the latest in the battle between the two camps since last November when the San Francisco-based Rdio went bankrupt after losing US$2 million each month. It sold its assets to Oakland, California-based Pandora for $75 million.

Sony is Rdio’s largest unsecured creditor, claiming $12.4 million. But the record company only got 5% of Rdio assets in the reorganisation. Sony subsidiary Orchard, which handles digital licensing for independents, has a $4.5 million claim and is Rdio’s third-largest unsecured creditor.

In April, Sony sued three top Rdio executives, accusing them of lying, hiding information to avoid millions in payment and retain the right to use the name. In court papers, Sony also hinted it might drag Pandora into the legal case as it may have been colluding with Rdio.

Rdio court papers demanding documents from Sony charged, “In particular, the Debtor (Rdio) believes that Sony and Orchard have engaged in anticompetitive 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.

“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.”

Pandora bought Rdio assets after pressure from Spotify and Apple Music. Rdio had 30 million songs in its catalogue. Pandora planned to use Rdio assets in its move to expand globally. Pandora is only available in the U.S., Australia and New Zealand. But Rdio was operating in 100 countries.

As part of this expansion, Pandora had started to negotiate direct licensing deals with record companies. Until then it had used interactive radio licenses, which made it possible for Pandora to play songs without having to strike individual deals with record labels and publishers.

Rdio was founded in 2010 by Skype’s co-founders Janus Friis and Niklas Zennstroem. Friis is thought to have invested more than $200 million in Rdio. In 2013, Rdio struck a deal with US radio giant Cumulus, trading 15% of its equity for $75 million in radio advertising, that valued the company at $500 million. Last November, Cumulus revealed to investors it took a $19.4 million write-down on its equity in Rdio through 2015.