Naxos Digital Service US has filed a lawsuit against Beijing-based Kuke Music, claiming $1.86 million in unpaid fees under their 2018 digital distribution agreement.

The agreement, set to run until 2026, allowed Kuke to distribute Naxos services, including music, spoken-word, and video libraries, to Chinese educational institutions and individuals. The contract specified increasing minimum license fees, reaching $1.34 million for 2023-2024.

Kuke, which operates the Beijing Music Festival and is listed on the NYSE, has faced significant challenges. Their stock value has dropped over 66% in six months, raising NYSE delisting concerns. The company's operations were also impacted by the pandemic.

After failed payment catch-up attempts and discussions, Naxos moved to terminate the agreement, as permitted by contract terms when payments are missed. The lawsuit seeks to recover the full $1.86 million in allegedly unpaid fees.

Notably, this legal action comes after Kuke's May announcement of plans to acquire two Naxos-related companies: Angelina Assets and HNH International. The companies share interesting connections, with Kuke's CEO He Yu holding 75% equity interest in Naxos, their largest content provider, and the two organizations maintaining a decades-long relationship.

The case highlights growing tensions in the classical music distribution landscape, particularly in the Chinese market, where Kuke positions itself as the leading provider of classical music services.

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