Chicago-based internet radio pioneer AccuRadio, which launched its free music streaming service in 2000, filed for Chapter 11 bankruptcy protection Wednesday amid an ongoing legal dispute over artist royalty payments.

AccuRadio, a leading independent streaming service offering nearly 1,400 music channels, owes SoundExchange, the organization empowered by Congress to collect digital royalties for recording artists, more than $10 million, according to the bankruptcy filing.

“AccuRadio has spent almost 25 years building an innovative and well-loved music streaming service while facing royalty obligations that climbed to levels that seem to suggest the system is rigged, perhaps inadvertently, against small and midsize streamers,” AccuRadio founder and CEO Kurt Hanson said in a news release Wednesday.

Last year, SoundExchange filed a lawsuit against AccuRadio seeking an undisclosed amount of past due digital royalties owed by the music streaming service, a case which is ongoing in Chicago federal court.

SoundExchange did not respond to a request for comment Wednesday.

In addition to SoundExchange, AccuRadio owes about $200,000 each to ASCAP and BMI, the organizations which collect and distribute royalties for songwriters, composers and publishers, according to the bankruptcy filing.

One of the nation’s earliest internet radio services, AccuRadio has grown from three music channels to an array of options curated by programming experts in more than 60 genres, covering everything from adult contemporary and smooth jazz to K-pop and Nordic folk songs. The channels are advertising-supported, like traditional over-the-air radio, with no subscription fees for users.

AccuRadio remains a leading music streaming service with nearly 10,000 average active sessions at any point during the day, according to the latest monthly ranking by Triton Digital. The service reaches more than one million listeners a month, according to Hanson.

Formed in 2003, SoundExchange collects royalties from digital music providers such as Pandora, SiriusXM and other services to pay to the featured artists performing on the recordings.

Over the years, AccuRadio has paid SoundExchange more than $13.5 million in royalties, according to its news release. But the service stopped paying royalties in 2018, according to the SoundExchange lawsuit.

A payment plan was agreed upon in February 2020, but SoundExchange alleged that AccuRadio failed to live up to the agreement, prompting the 2024 lawsuit.

Hanson said months of “good faith” negotiations with SoundExchange ultimately failed to reach a lawsuit settlement, leading AccuRadio to file for bankruptcy protection.

“We were extremely disappointed that we couldn’t reach a negotiated settlement,” Hanson said in the news release. “Furthermore, AccuRadio resumed full current payments to SoundExchange many months ago and continues to keep current with ongoing obligations.”

In its news release, AccuRadio noted that large traditional radio chains such as iHeartMedia, Cumulus and Audacy have all successfully navigated Chapter 11 bankruptcy filings in recent years.

Ironically, legacy terrestrial radio broadcasters have struggled in the digital age, in large part due to increased competition from music streaming services such as Pandora and Spotify, according to industry experts.

AccuRadio’s music streaming service remains fully operational and Hanson said the company intends to follow suit with its larger radio brethren and successfully emerge from bankruptcy as well.

“Filing for bankruptcy protection wasn’t an easy decision, especially since our revenues have been consistently improving and we have returned to profitability, but we are confident that AccuRadio will emerge from it healthier and more resilient, and will continue to be an outlet for human-curated music that our listeners desire and cherish,” Hanson said.

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