SoundExchange‘s lawsuit accusing Music Choice of underpaying royalties owed to artists and labels is heading back to court.
The case was filed in April 2019 and has been largely on hold since December 2021.
Since then, the two sides have argued over the meaning of a single royalty rule before the Copyright Royalty Board, which sets rates for US statutory music licenses, and a federal appeals court.
On November 2, the two companies filed a joint report with the federal court in Washington, DC, which had ordered them to report back once Music Choice‘s appeal was resolved.
The November 2 filing can be read in full here.
The two companies are proposing a period of roughly 75 days to exchange evidence on damages, followed by settlement talks or mediation, according to the filing.
Under that timetable, the talks would wrap up in early March.
SoundExchange is the nonprofit designated by the Copyright Royalty Board to collect royalties from services that use recordings under government-set licenses, and to pass them on to artists and labels.
Music Choice runs music channels carried by cable and satellite TV providers, along with a background-music service for businesses.
The publicly held companies with stakes of 10% or more in Music Choice were Sony Group Corporation, Warner Bros. Discovery, CommScope, and Comcast, according to a January 2025 court filing.
Warner Bros. Discovery has since been acquired by Paramount Skydance, and the combined company has operated as Skydance since the deal closed on October 6.
CommScope Holding Company, the entity named in the filing, renamed itself Vistance Networks in January after selling the business that carries the CommScope name to Amphenol.
The lawsuit concerns Music Choice‘s business service, known in royalty rules as a business establishment service, or BES.
Under the board’s rules, services like this pay royalties as a percentage of the revenue they earn from the service: 10% from 2009 to 2013 and 12.5% from 2014 to 2018.
SoundExchange alleges that Music Choice paid royalties on only a fraction of its BES revenue, leaving out money it linked to channels that also appeared in its consumer TV service.
A federal appeals court in Washington, DC, citing oral arguments in the case, wrote that the dispute over the rule’s meaning had “tens of millions of dollars” on the line.
SoundExchange sued in April 2019, after an audit of Music Choice‘s royalty payments for 2013 to 2016, as MBW reported at the time.
In December 2021, Judge Reggie B. Walton sent the question of what the rule means to the Copyright Royalty Board, and paused the case while it decided.
The board’s three judges sided with SoundExchange in a ruling issued to the parties on December 4, 2024.
They concluded that services like Music Choice‘s BES must pay royalties on all the fees and payments they receive for the service, with an exception limited to certain non-cash payments.
“Music Choice is simply trying to unfairly obtain a ‘free ride’ on the use of the copyrighted sound recordings,” the Copyright Royalty Board ruling states.
Music Choice asked the US Court of Appeals for the District of Columbia Circuit to overturn that ruling in January 2025.
The federal court in Washington, DC, then paused the lawsuit again in April 2025, pending the outcome of that appeal.
On August 18, 2026, a three-judge panel threw out Music Choice‘s challenge, ruling that the appeals court had no power to review the board’s decision.
The panel also found that the board’s ruling was not legally binding on Music Choice.
The DC Circuit‘s opinion states: “Music Choice and SoundExchange are free to return to their still-pending litigation in the district court…. We leave to that court the task of assessing what weight, if any, to assign to the Royalty Board’s non-binding regulatory interpretation.”
That leaves Judge Walton to decide how the rule should be read.
According to the appeals court, the royalty rule at the center of the case applied to every background-music service operating under the government-set license between 2009 and 2018, and its substance has not meaningfully changed since.
SoundExchange‘s original complaint, filed in 2019 and superseded by an amended version in 2022, alleged that Music Choice‘s approach meant it “hid from SoundExchange the vast majority of the fees and payments it actually received from the provision of its BES.”
“Delivery of the same music channels to different customers as part of a different service does not make the use of sound recordings in the BES free of any statutory royalty obligation,” the SoundExchange complaint argued.
The complaint also claimed that Music Choice “invented its own formula for the allocation of BES receipts, which is not permitted by the CRB’s regulations.”
It further alleged that Music Choice “reportedly paid royalties to SoundExchange using an allocation formula that assumed roughly half the number of BES channels than Music Choice appears to have provided.”
According to the complaint, Music Choice did not fully cooperate with the audit, carried out by accounting firm Prager Metis, “among other things, by refusing to provide Prager Metis access to any information pertaining to its activities in 2013.”
The original complaint did not put a figure on the total amount SoundExchange was seeking.
It stated that Prager Metis “concluded that SoundExchange was due millions of dollars, including both unpaid royalties based on persistent underreporting of Gross Proceeds and late fees.”
SoundExchange also claimed that Music Choice “engaged in the same conduct before and after the 2013-2016 verification period as well,” and said that would entitle it to further royalties and late fees.
Under the royalty rules cited in the complaint, late fees on unpaid amounts run at up to 1% a month, or 0.75% a month before 2014.
The complaint also sought around USD $35,000 in audit costs, plus SoundExchange‘s legal fees.
When the suit was filed in 2019, SoundExchange‘s then-Senior Vice President and General Counsel Colin Rushing said: “Music Choice’s actions reflect a persistent effort to avoid paying royalties for its use of protected sound recordings.
“Its creative accounting has cheated creators out of the royalties they are due and is inconsistent with the Copyright Royalty Board’s regulations.
“We hope this action will compel Music Choice to pay the royalties that are due to music creators and to change its practices moving forward.”
Music Choice has denied underpaying. It has argued that, under the rule, it owes royalties only on revenue from music it provides exclusively to business customers, according to the appeals court’s summary of its position.
The case now resumes as SoundExchange‘s ability to bring lawsuits like this one is being tested in a separate dispute with SiriusXM.
In August 2025, a federal judge in New York threw out SoundExchange‘s lawsuit accusing SiriusXM of underpaying royalties, ruling that the law designating SoundExchange to collect those royalties does not give it the right to sue over them.
SoundExchange appealed, and says SiriusXM‘s alleged underpayment now exceeds USD $400 million, a claim SiriusXM denies.
The US Court of Appeals for the Second Circuit heard arguments in that appeal on September 25, 2026, and has not yet ruled.
The appeal has also put SoundExchange‘s USD $3.4 million lawsuit against Sonos on hold.Music Business Worldwide
