Copyright Royalty Board Raises Rate for SiriusXM, Lowers It for Music Choice

Sirius_XM_Microphone - Getty - H 2016
Getty Images

Sirius_XM_Microphone - Getty - H 2016

"It is long past time for Congress to change the standard that currently forces music creators to subsidize flourishing companies," responded SoundExchange CEO Michael Huppe.

The Copyright Royalty Board has determined that Satellite Audio Radio Services, i.e. SiriusXM, will pay 15.5 percent of revenue for the next five years beginning in 2018 to 2022, although the full determination has yet to be posted on the CRB's website while the participants scrutinize the document to make sure proprietary data is not publicly revealed.

That represents a nearly 41 percent jump from the 11 percent the service is currently paying, although it's short of the 23 percent that SoundExchange was advocating for. But it's better than the static rate that SiriusXM was hoping for from the judges.

While apparently happy for the higher rate, SoundExchange issued a statement urging Congress to change the "grandfathered" disposition that allowed the CRB to take into consideration the cost of building and launching expensive satellites in the early days of the industry when Sirius and XM were still separate entities, competing against each other and losing money.

"Yesterday's decision confirms the need to change the so-called Section 801(b) rate standards under which satellite radio and the 'grandfathered' cable radio services operate, and which permit the CRB to adopt rates different than what the market would provide," SoundExchange said Friday in a statement. "As a result of that rate standard, SiriusXM has paid below-market rates for years, and the recording artists and rights owners SoundExchange represents have subsidized the company's growth."

In the first nine months of this year, SiriusXM has generated net income of $691.3 million, or 14 cents per diluted share, on revenues of $4.02 billion.

"There's no reason recording artists and record labels should subsidize a company as profitable as SiriusXM," said SoundExchange president and CEO Michael Huppe. "Everyone should play by the same rules, and it is long past time for Congress to change the standard that currently forces music creators to subsidize flourishing companies whose success is built on top of the music."

In another move that will be viewed as disappointing to artists and labels, the CRB — a royalty setting tribunal created by Congress that is part of the U.S. Copyright Office of the Library of Congress — ruled that pre-existing subscription services (Music Choice and Muzak) will enjoy a reduced rate of 7.5 percent of revenue for the next five years. That is down from 8.5 percent of revenue in the current year that the two services are paying to the industry.

"Music Choice and Muzak pay significantly lower rates than their non-grandfathered competitors offering the same service," SoundExchange noted in a statement urging Congress to establish rate standard parity so all digital services are subject to a "willing buyer/willing seller" standard.

"SoundExchange is dedicated to our mission of ensuring that creators are properly recognized and compensated for the use of their work," added Huppe. "And while the Copyright Royalty Board did not adopt the rates we proposed for SiriusXM, its ruling demonstrates an important step in the right direction toward valuing the contributions of the music creators represented by SoundExchange."

At press time, the SiriusXM company website hadn't yet acknowledged the CRB's decision. The company couldn't be immediately reached for comment.

While many in the music industry have long complained that SiriusXM rates are not set by "market" consideration, the company nevertheless has one of the highest per-play rates in the U.S. industry, paying some $25-$30 per play, according to industry sources and as disclosed in the settlement the company made with the Class Actions lawsuit led by The Turtles.

Meanwhile, the industry is still anxiously awaiting other rate-setting decisions from the CRB, such as the mechanical rate record labels and on-demand digital services that use the compulsory license have to pay publishers.

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