Napster Faces Backlash From Labels Again — This Time for Late Royalty Payments

At least half a dozen distributors and record labels are frustrated with the streaming service Napster due to late royalty payments, executives tell Billboard. In some cases, rights holders say Napster is a few months behind schedule; in others, the lag on payments is well over a year. 

Napster, despite its history as a pirate-disruptor to the recorded music business around the turn of the century, has long operated as a licensed streaming service, albeit a small one. But “for years, they have cited fundraising struggles as an excuse for delayed royalty payments,” according to one executive at a distributor who spoke on the condition of anonymity.

Napster’s CEO, Jon Vlassopulos, declined to comment.

Napster is not the first streamer accused of falling behind on payouts. A lawsuit against TIDAL in 2021 revealed that the platform had $127 million in liabilities, mostly in the form of unpaid streaming fees to record labels. TIDAL CEO Jesse Dorogusker told Billboard in 2023 that the payment situation had been remedied following TIDAL’s acquisition by Block.

More recently, labels and distributors have said they are struggling to get timely payments from Boomplay, a streaming service with a large user base in Africa. In December, Sony Music pulled its catalog from the platform.

At the end of 2023, Boomplay said it had 98 million monthly active users across Africa. Napster is considerably smaller: It had a little more than 1 million monthly active users at the end of 2020, according to Music Ally. 

Rights holders acknowledged to Billboard that the royalties they had received in the past from Napster account for just a small fraction — often less than 1% — of their overall streaming income. “What we earn from it as a distributor isn’t that much,” says an executive at another distribution company that is missing many months of Napster payments. 

“But,” he continues, “in terms of payouts to the artists and the labels who we represent, it can be a solid sum of money.” $100,000, for example, may be a drop in the bucket for a volume distributor. However, that money can make a meaningful difference for a small indie label.

Napster launched in June 1999 as a file-sharing service that allowed users to download tracks for free. It was soon battling copyright infringement lawsuits from various heavy-hitters, including Metallica, Dr. Dre and the RIAA. “Napster is not developing a business around legitimate MP3 music files, but has chosen to build its business on large-scale piracy,” the RIAA wrote in a suit filed in 1999. 

This first version of Napster shut down in 2001. The following year, Bertelsmann announced that it would acquire the service and turn it into a licensed listening platform. But a judge later blocked the sale. 

In the years since, Napster has bounced from one home to another. It was first acquired by Roxio and then by Best Buy for $121 million in 2008. Three years later, Napster was scooped up by Rhapsody, an early music streaming service. Rhapsody subsequently rebranded itself as Napster in 2016. 

In 2020, the virtual reality concert app MelodyVR bought Napster for $70 million. The company changed hands yet again in 2022, with Hivemind Capital Partners and cryptocurrency company Algorand becoming the new owners. 

Vlassopulos took over as Napster’s CEO in the fall of 2022 following a stint as global head of music at Roblox. Two decades before, he had worked at Bertelsmann and been part of the team that put together the deal for Napster — only to have it scuttled months later. “It always stayed with me: What if we could have finished what we started?” Vlassopulos explained in an interview last year.

But first, he had to work on “cleaning up the Napster business.” “The company had been around for 20 years, and so now we’ve modernized,” Vlassopulos added. “We’re right at break even, and we’re kind of in a process now to raise material funds, or the company is maybe looking to roll us up into something bigger.”

Despite this progress, some rights holders told Billboard that they were considering pulling their catalogs from Napster, or no longer delivering new releases to the platform. 

When labels and distributors are not receiving payments from streaming services, taking their catalogs off platforms is one of their only options. The other is to take legal action against the streamer. 

But litigation is costly and time-consuming, which means rights holders are usually stuck sending follow-up emails over and over again. This hasn’t worked for several companies trying to get money owed to them by Napster, though. “Not only have they failed to pay royalties,” says the first distribution executive, “but they have also been unresponsive when we’ve attempted to resolve these matters.”