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SiriusXM Sued Over Alleged Underpayment of Royalties

SoundExchange believes the satellite radio behemoth shouldn't have subtracted older tunes from gross revenues reported.

Sirius XM Satellite Radio Logo - H 2011

SiriusXM, the satellite radio giant, is being hit on all sides over the suddenly hot issue of pre-1972 recordings.

Earlier this month, Flo & Eddie of The Turtles filed a proposed class action against the company for allegedly infringing millions of recordings that came before Feb. 15, 1972, when recordings began falling under federal copyright protection. The plaintiffs assert that SiriusXM has "reproduced, performed, distributed, or otherwise exploited" pre-1972 recordings without license.

On Monday came a new lawsuit against SiriusXM, with compensatory damages estimated between $50 million and $100 million.

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SoundExchange, the digital performance rights organization that collects royalties on behalf of sound recording copyright owners, says that SiriusXM has been underpaying. SoundExchange outlines various ways this has allegedly occurred, and one of the bigger ones is that SiriusXM has excluded from gross revenue calculations performances of pre-1972 recordings.

Pursuant to the law, SiriusXM is able to gain a statutory license to digitally perform sound recordings protected by federal copyright. The Copyright Royalty Board sets licensing rates, and currently, SiriusXM's royalty fee is calculated as a percentage of its gross revenues. (It was 8 percent last year.) The CRB has recently come out with new rates and terms for the period between 2013 and 2017, and there have been clarifications that SiriusXM doesn't owe SoundExchange going forward for pre-1972 recordings, but this lawsuit covers the issue of how revenues get recognized, and is seemingly most concerned with the past rate period between 2007 and 2012.

In Monday's lawsuit, filed in DC federal court, SoundExchange says, "Rather than paying a percentage of Gross Revenues as that term is defined in the federal regulations, SiriusXM devised its own definition of Gross Revenues – a definition that substantially reduced its royalty payments to SoundExchange."

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Over the last few years, SiriusXM has been allegedly reducing its reported gross revenues by between 10 and 15 percent, corresponding to the performance of pre-1972 sound recordings.

SoundExchange objects that SiriusXM made such a reduction despite "unambiguous regulations."

According to the lawsuit, "In its decision announcing royalty rates and terms for 2013 to 2017, the CRB confirmed that the regulations in effect between 2007 and 2012 did not permit SiriusXM to exclude revenues purportedly attributable to performances of pre-1972 sound recordings."

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The lawsuit also makes the point that SiriusXM has been doubling its pleasure on older tunes. Says the lawsuit, "SiriusXM has taken the position that the federal statutory license does not cover pre-1972 sound recordings, and on information and belief, SiriusXM is not separately licensing the pre-1972 sound recordings from their owners, even though they are subject to common law copyright or equivalent protection under state law."

Whether or not that's a nod to The Turtles' lawsuit is unclear.

SiriusXM also is alleged to be manipulating the gross revenues it reports monthly to SoundExchange in other ways, including excluding revenue it has received from the difference in price between its standard and "premier" packages and revenue derived from its "Family Friendly" and "Mostly Music" packages. SoundExchange also says it is due late fees.

The latest lawsuit continues the battle between the two entities. Last year, SiriusXM sued SoundExchange over an alleged conspiracy to monopolize copyrights from the recording industry. The satellite radio giant said it wanted to make direct deals with rights holders.

SiriusXM hasn't commented about the new lawsuit.