Indie classical music label group Naxos has sued Kuke, a classical music streaming service from China, alleging that Kuke has failed to make more than $1.8 million in payments over the past three years.
In a complaint filed with the US District Court for the Middle District of Tennessee on Friday (October 4), Naxos said Beijing-headquartered Kuke began to fall behind in its licensing payments in late 2021, and has since paid only a fraction of what it owes.
Naxos asked the court to order Kuke to pay the amount in full, plus interest and compensatory damages.
The lawsuit is the latest financial headache for Kuke, which raised $50 million in an IPO on the New York Stock Exchange in January 2021. However, not long after, the company’s share price slid below the $1-per-share minimum required for a listing on the NYSE, threatening the company with delisting.
Kuke announced earlier this month that it had regained compliance with NYSE listing rules, with its stock trading at around $1.30 at the time. However, the stock price has once again fallen below $1 in recent weeks.
According to Naxos’ legal complaint, which can be read in full here, Kuke and Naxos signed an eight-year digital distribution agreement in 2018 that would see Kuke license music from Naxos’ group of labels as well as third parties.
Lawyers for Naxos said Kuke made its monthly payments on time until December 2021, when the payments stopped.
“While Naxos continued to send invoices to Kuke on a monthly basis, Kuke did not make the requisite payments to Naxos,” the complaint states.
In May 2023, Naxos notified Kuke that the streaming service was in breach of contract, and requested that the company make back payments in the amount of $1.055 million.
Kuke responded by acknowledging it was in breach of contract, and proposed a monthly payment plan to pay back the amount in arrears by the end of 2023, the complaint stated.
“While Naxos continued to send invoices to Kuke on a monthly basis, Kuke did not make the requisite payments to Naxos.”
Naxos, in a legal complaint against Kuke
After some negotiations, Naxos agreed to a repayment plan that would see Kuke repay the amount outstanding, with 6% interest, in $200,000 installments over the course of 2023, with the remaining amount due at the end ot the year.
According to the complaint, Kuke made two payments of $50,000 – well below the $200,000 monthly payments agreed to – and made no further payments.
In a letter sent to Kuke in April 2024, Naxos demanded that Kuke “send payment to Naxos for the unpaid amount” of $1.43 million by the end of that month. The letter also demanded that Kuke take down all third-party distributed music covered by the agreement with Naxos. However, as a sign of good will, Naxos allowed Kuke to keep streaming music from its own labels.
Those labels include the flagship UK-headquartered Naxos Records, as well as folk label ARC Music, Austrian classical label Capriccio, Italian classical/opera label Dynamic, German classical labels Oehms and Orfeo, and Finnish classical label Ondine.
Kuke responded to Naxos’ demands by saying it had begun taking down the third-party label music, and offered a payment of $30,000 in three weeks’ time.
Naxos responded that a $30,000 payment was “totally unacceptable” and asked that its own record labels also be removed from Kuke’s library.
After “continued, unsuccessful” negotiations between the two companies, Naxos notified Kuke in May 2024 that it would begin proceedings to end the distribution agreement if it didn’t receive payment in full within three weeks, and noted that Kuke had failed to take down Naxos-owned content from its service.
The complaint states that Kuke responded by saying it was working on a new repayment proposal, but no such proposal was forthcoming.
As of September 1, Kuke owed Naxos $1.855 million, the complaint stated.
Naxos asked the court for full payment including interest, as well as compensatory damages on the amount in arrears.
Despite the ongoing conflict over payments, Kuke and Naxos appear have continued to do business in other ways.
Earlier this year, Kuke announced its intention to acquire majority stakes in two companies within the Naxos Musical Group, Angelina Assets Limited and HNH International Limited. The company hasn’t offered any public updates on the planned acquisition since that time.Music Business Worldwide