Rights group faces off against over payments

DENVER (Billboard) - is facing renewed heat from music companies over its free on-demand music service.

The latest disgruntled message comes from Merlin, an international rights body representing some 12,000 members of the independent music community. On the heels of’s announcement that it was commencing a program to pay unsigned and independent artists royalties for each time their song is streamed, Merlin issued a notice to its membership cautioning them not to accept the deal.

Merlin wants to strike a deal with directly that will cover all its members. But if members strike out on their own and take’s royalty deal, that would weaken Merlin’s negotiating position. says about 70,000 indie labels have joined the royalty program, collectively uploading more than 450,000 tracks since January.

At issue is whether is infringing on any copyrights. Without providing any specifics, Merlin claims that allows users to stream “numerous” tracks of music on demand that are not properly licensed and wants any licensing agreement to retroactively compensate its past infringement.

“ has limited licenses with some labels, but some of their service is still and always has been unlicensed,” a Merlin representative said.

While most unlicensed songs are limited to 30-second clips on, those of lesser-known acts may still stream in full. removes any such tracks upon request.

To date, no one has sued for copyright infringement. Historically, if a digital music service was accused of infringing on copyrights, there would be a lawsuit, the settlement of which would include a payment for past damages and, in some cases, a new licensing deal that may include some equity stake.

Warner Music Group, which was the first major label to strike a licensing deal with the service, pulled its content from in June, after its license expired. WMG wants to renegotiate its deal because it feels the payments has submitted for per-song streaming are less than expected, and it is disappointed that the company has not yet implemented a promised monthly subscription service.