Music streamer Melon accused of siphoning W5 billion royalties

Music streaming service Melon faces investigation for allegedly swindling music royalties, local newspaper Hankyoreh reported Monday. Korea Times files

By Lee Gyu-lee, Park Si-soo

Korea's major music streaming service provider Melon is under investigation on suspicion it siphoned off about 5 billion won ($4.23 million) between 2009 and 2011 by establishing a “ghost company” handling royalty distribution.

The prosecution raided the company's headquarters in Seoul on May 27 and confiscated documents and computer files.

“The raid was to secure hard evidence backing allegations raised against the company,” an investigator was quoted as saying. “I can't give further details because the investigation is under way.”

According to reports, between 2009 and 2011, Melon live-streamed copyrighted songs to subscribers on condition the company took 46 percent of service revenue while the remaining 56 percent went to copyright holders.

But Melon arbitrarily inserted a ghost company named “LS Music” into the distribution process and used it for royalty payments. LS charged 10-20 percent of royalty as a “brokerage fee,” said investigators familiar with the case.

Melon ― established in 2004 as an SK Telecom in-house startup ― was merged into Korean IT giant Kakao in 2016.

Kakao officials said they were checking what happened because the alleged problem took place before its merger.