A federal judge has denied Downtown Music’s bid to dismiss lawsuit claiming it dropped a YouTube licensing partner as a “sacrifice” to help win approval of its merger with Universal Music Group.
The case was filed by Blast Off Media, which offers free music for YouTube creators, over claims that Downtown destroyed its business by abruptly terminating a distribution deal. Downtown says it rightfully killed the partnership because Blast Off was linked to streaming fraud and violating YouTube’s rules.
In a ruling Wednesday (Aug. 5), Judge Paul Engelmayer rejected key elements of Blast Off’s case, substantially narrowing the lawsuit. But he refused to dismiss accusations that Downtown breached their contract by immediately ending the relationship, allowing those claims to move ahead toward trial.
Downtown had argued Blast Off’s violations were so widespread that the company couldn’t have fixed them. But the judge said it was contractually required to give Blast Off 30 days to try: “Because the [lawsuit] plausibly alleges breaches by Downtown… the court denies the motion to dismiss with respect to this claim.”
Blast Off offers a library of backing tracks that YouTube creators can add to their videos. It signed a distribution deal with Downtown in August 2025, tapping the company to run point on monetizing the tracks and navigating YouTube’s copyright claims process.
But in a November 2025 complaint, Blast Off demanded $375 million in damages on the grounds that Downtown had illegally ended the partnership just months after it started. The case claimed the bigger company had flagged only a few examples of problems before its “absurdly disproportionate” response, causing Blast Off to be delisted on YouTube and inflicting “catastrophic” harm on its business.
“This case involves the calculated destruction of a rapidly growing independent music business by a large company… seeking to escape an agreement they determined to be financially and/or strategically disadvantageous by manufacturing a pretext,” wrote Blast Off’s lawyers from the law firm Quinn Emanuel.
More provocatively, the lawsuit claimed that the real reason Downtown killed the deal was to avoid any kind of scrutiny as it sought regulatory approval for its $775 million sale to UMG. The deal ultimately closed in February, but Blast Off’s lawyers had argued that any whiff of problems on YouTube, even if they were false, might have held up the transaction.
“Downtown preemptively chose to sacrifice Blast Off’s rights rather than work through routine compliance matters out of an abundance of caution to protect its larger financial interests during a sensitive period.”
Downtown tells a very different story. In its own court filings, it says it quickly came to learn that Blast Off’s entire business revolved around violations of YouTube’s rules, including drawing significant revenue from channels that re-use existing content. It said it fairly ended the partnership due to “a broken business model that Blast Off either cannot or is unwilling to fix.”
After it refused to keep working with such a company, Downtown says Blast Off filed a “farcical and far-fetched lawsuit” aimed at winning an “extraordinary windfall.”
“Because of bad industry actors like Blast Off, streaming fraud remains one of the music industry’s greatest current problems,” Downtown’s lawyers wrote in a motion to dismiss the case. “Streaming fraud exists in many and evolving forms — including the parasitic content associated with Blast Off’s music — but comes down to rogue actors seeking to exploit the music streaming industry to siphon off legitimately earned royalties from the true rightsholders.”
In Wednesday’s ruling, Judge Engelmayer sided with Downtown on key parts of the case. He said Blast Off had failed to make a case that Downtown fraudulently induced the smaller company into signing the partnership, or that it had wrongly interfered with Blast Off’s clients by delisting its catalog.
Those rulings could significantly narrow the size of the case. Downtown had argued that the contract claims don’t allow for the huge damages total Blast Off is seeking; in Wednesday’s decision, Judge Engelmayer seemed to agree, saying in a footnote that the request to exclude those damages was now moot after he tossed out the other elements of the case.
But he refused to dismiss the case entirely. He said that Blast Off’s allegations, if later proven true, would amount to several breaches of the contract by Downtown — including its decision to kill the deal without giving the smaller company a chance to fix its YouTube problems: “The [lawsuit alleges] that Blast Off had a history of remedying compliance issues and took immediate steps in response to the warning email.”
The ruling does not mean Blast Off has won those claims. The case will now proceed into discovery and further litigation, where it will be required to prove with evidence that Downtown was not entitled to terminate the deal or otherwise breached the contract.
Downtown declined to comment on the judge’s decision, while Blast Off did not immediately return request for comment.
