SoundExchange Says Sirius XM Continues to Pay ‘Below Market Rate” Music Royalties
Sirius XM will continue with “below market rate” music royalty payments despite a recent Copyright Royalty Board (CRB) decision raising the amount it pays SoundExchange, said SoundExchange President Michael Huppe at the Digital Media Wire Music Conference in New York.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The CRB in December imposed royalty increases starting with nine percent of gross revenue this year and reaching 11 percent in 2017. Sirius previously paid eight percent. SoundExchange had sought 12 percent this year, growing to 20 percent in 2017. SoundExchange collects performance royalties for record labels and musicians, having paid out $460 million in 2012, an amount that’s expected to surpass $500 million this year, Huppe said. The figure was $25 million in 2005, he said.
Sirius operates under a different set of rules that allows them to pay something that is not fair market value,” Huppe said. “All we ask is that it be fair market value and we don’t think big companies with tens of billions of dollars ought to be subsidized by the artists and record labels who drive the entire business."
While Sirius XM offers a range of programming that also includes sports and talk radio, “it would be nothing without music,” Huppe said. “If you took away that one category of programming, it would make their business unsustainable and we think they should pay fair market value for that,” Huppe said. Sirius XM officials weren’t available for comment.
Huppe was less critical of Pandora’s push behind the Internet Radio Fairness Act that seeks to bring parity to the royalty rates paid by Internet, satellite and cable broadcasters. The House Intellectual Property Subcommittee had a hearing on the proposed legislation in late November and House Judiciary Committee Chairman Bob Goodlatte, R-Va., recently said there would “probably” be multiple hearings this session to examine music performance royalties. SoundExchange agrees with Pandora’s efforts to level the playing field on paying royalties, Huppe said. Pandora has argued that it pays 70 percent of it annual revenue for royalties.
"A lot of what Pandora is unhappy about we agree with,” Huppe said. “It’s not fair that some platforms pay to use the sound recording while others don’t. And it’s not fair that over-the-air radio makes $15 billion off music and the industry doesn’t see any of it. We agree that everyone should pay for the music that makes our business and we agree that everyone should play by the same rules."
SoundExchange “wants Pandora to be success,” but it also needs to ensure the record labels and musicians it represents are “paid fairly for the content,” Huppe said. Pandora’s 65 million “active” users listen an average of 20 hours per month, an amount that would produce $4 each in annual royalties that is “spread across hundreds or maybe thousands of artists and record labels,” Huppe said. Pandora officials weren’t available for comment.
While the traditional music business, dominated by CDs, has been in decline since hitting its peak in 1999, it is being replaced by digital download and Internet music services where “consumption is growing rapidly,” said Michael Simon, CEO of The Harry Fox Agency, which licenses, collects and distributes royalties on behalf musical copyright owners. “Hundreds of millions of dollars” are being invested in digital media and online music services by private equity and venture capital firms, he said.
With the number of Internet connections increasing eight percent annually globally and three to four percent in the U.S., “the proliferation of online music distribution is making the next music business bigger than the one we are lamenting the demise of,” Simon said.