Naxos Digital Service US is suing Beijing-based Kuke Music for $1.86 million over allegedly unpaid fees stemming from a 2018 digital distribution agreement.

Under the 2018 agreement, Kuke was authorized to sell Naxos services - including music, spoken-word, and video libraries - to customers and educational institutions across mainland China. The contract was set to run through 2026 with potential yearly renewals.

Key details of the dispute:

• The agreement required Kuke to pay increasing minimum license fees each year, reaching $1.34 million for 2023-2024
• Kuke allegedly failed to make multiple payments, including fees for third-party distributed labels
• Naxos terminated the agreement after payment discussions were unsuccessful
• The lawsuit seeks recovery of $1.86 million in total unpaid fees

Adding complexity to the situation, Kuke announced plans in May to acquire two Naxos-affiliated companies - Angelina Assets and HNH International - from Naxos One Holding. Regulatory filings reveal deep existing ties between the companies:

• Kuke's leadership has a "decades-old relationship with Naxos"
• Kuke CEO He Yu holds 75% equity stake in Naxos, their largest content provider
• Kuke's director is also the controlling shareholder of Naxos One

The lawsuit comes as Kuke faces other challenges, including a 66% drop in share value over six months and NYSE delisting concerns. The company, which organizes the Beijing Music Festival, has likely been impacted by pandemic disruptions to its operations.

The case is currently pending in Tennessee federal court, where Naxos seeks full payment of the allegedly owed funds.

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