WASHINGTON – August 15, 2012 – SoundExchange today released a list of more than 50,000 recording artist and record label names owed tens of millions of dollars in unclaimed digital performance royalty payments. This list also includes more than $31 million in royalties that are three or more years old.

 The  artists and labels named on the list have accumulated unclaimed royalties waiting to be paid out by SoundExchange, the nonprofit organization entrusted by the Library of Congress to collect and distribute royalties for sound recordings streamed on Internet radio, satellite radio and cable music services.

SoundExchange is encouraging recording artists and record labels to view the searchable database located on its website to learn more and register to receive their share. The unclaimed royalties, ranging from $10 to more than $100,000, have been collected by SoundExchange during the past decade.  Those that are not included on the list, and have not yet registered with SoundExchange, are encouraged to also register to receive future digital radio royalties.

SoundExchange has paid more than $1 billion in digital performance royalties to the artists and labels it represents since its inception. However, despite rising revenues and the organization’s increased outreach efforts, millions of dollars in royalties still remain unclaimed.

“The digital music industry is continuing to grow, providing recording artists and record labels with an increasingly beneficial revenue stream. We are doing everything possible to make sure artists and labels know that and capitalize on it,” said SoundExchange President Michael Huppe. “SoundExchange is releasing this list in hopes of getting artists and copyright holders to claim their digital performance royalties. We want to get the money out of our bank account and into theirs – plain and simple.”

SoundExchange has contacted tens of thousands of recording artists and record labels owed money throughout the years, and has registered more than 30,000 artists and labels in the last three years alone. As digital music listenership and performance royalties continue to grow, SoundExchange continues to increase its outreach efforts to educate and register those who have not yet claimed their share. The organization attends music industry events, and also reaches out via phone, email, social media, advertising, as well as via the posting of smaller, more targeted lists. SoundExchange also regularly matches its lists of unregistered recording artists and record labels against organizations whose members or user-base consists of these individuals. Past partners include BandPage, TuneCore, SonicBids, MySpace, Reverbnation, and more than 150 others.

To register online, visit: http://sndx.co/register.

In its decision, the D.C. Circuit held that the statute creating the CRB did indeed have a small technical constitutional defect, but solved that problem by striking down a portion of the statute limiting the Librarian of Congress’s power to remove Copyright Royalty Judges. With that small change, the D.C. Circuit resolved the constitutional challenge and has put to rest any question about the constitutionality of the CRB.

Importantly, in its decision, the D.C. Circuit declined to address IBS’s arguments about the rates themselves. Instead, the court decided to “vacate and remand” the determination, on the ground that the CRB was unconstitutional when the determination was first issued. In other words, the D.C. Circuit addressed the constitutionality of the CRB, fixed it, and did not address the Webcasting III rates. The determination has been sent back to the CRB to handle as a matter of procedure.

What does this mean for webcasters working with SoundExchange?

The D.C. Circuit’s decision does not have any immediate effect. As a matter of procedure, all parties now have an opportunity to seek “rehearing” before the court’s decision becomes final. All the current rates and obligations remain in effect.

In the event the D.C. Circuit does not change its decision, and vacates and remands the case to the CRB, SoundExchange plans to request that the CRB reissue the same rates and terms without any further proceedings. SoundExchange believes this matter can be resolved simply on remand and expects the CRB to reaffirm its original determination. In the meantime, all licensees are required to continue to make payments under the established rates as they have been.

The Majority of Webcasting Royalties Are Not Impacted by This Decision

It is important to remember that this decision only affects services paying under the default rates and terms set by the CRB for webcasting. Thus, the D.C. Circuit’s decision has no impact whatsoever on services that elected rates and terms under the Webcaster Settlement Act (WSA), such as the pureplay rates and the broadcaster rates that cover the majority of webcasting royalties that we receive.

Assuming the D.C. Circuit returns the case to the CRB later this year, we will provide more guidance in terms of what we expect from licensees operating under the default rates at that time.

Among SoundExchange’s top 2012 priorities are its efforts to overhaul its royalty distribution platform, and the technology and processes from which its core business operates. In addition, SoundExchange is improving data quality reported by services and gathering repertoire data from record labels and recording artists; the result will be a single, authoritative repertoire database that will benefit the entire music industry. SoundExchange has already made headway in our continued artist and label outreach efforts. Together with partner organizations, more than 15,000 new artists and copyright holders were registered in 2011 — totaling 30,000 in the past three years alone!

Considering all these new benchmarks, there is one constant reoccurring theme: The music industry is undergoing a major digital shift, and one that has given artists and record labels new hope for the future of music. And SoundExchange is at the center of this exciting transition.

SoundExchange continues to provide a fast-expanding stream of revenue to the digital music industry. Digital music listening is expanding at a steady clip, with consumers having more free and subscription digital listening options – including consumer devices like phones, computers and even cars. And while according to International Federation of the Phonographic Industry (IFPI) digital revenues increased by eight percent to $5.2 billion worldwide, SoundExchange’s royalty payments to artists and labels have grown 17 percent to an estimated $292 million in 2011. That’s nearly triple from 2008. Overall SoundExchange distributions from inception to date now exceed $900 million.

“SoundExchange is now the number two digital revenue source behind iTunes for many record labels in the U.S. Since our first substantial distribution in 2005 of $20 million, the number of people listening to the type of music services we collect on continues to explode,” said Michael Huppe, president, SoundExchange. The organization’s work is responsible for creating new revenue streams and enabling new business models for the music community. “What excites me most is where we’ll be in the next five years, and the countless ways we can serve the music community. We’re optimistic about the industry’s future, and about the tremendous value SoundExchange promises to deliver in the years to come.”

As we explain in our motion to dismiss, we believe the complaint should be tossed out of court for at least the following reasons:

1.SiriusXM sued SoundExchange due to its role in helping record labels collectively negotiate the statutory license — the very activity that Congress specifically encouraged. When it created the statutory license for licensing digital music performances, Congress provided copyright owners the ability to work together in rate negotiations for the use of their digital performances. This ability made good policy sense; otherwise the parties would have difficulty making the license work properly. Congress also decided that if the copyright owners and services didn’t reach agreement, copyright owners would not have the right to walk away as they would with traditional negotiations. Instead the rates would be set by the Copyright Royalty Board (CRB). Sirius XM is trying to prevent SoundExchange from engaging in even the most basic efforts to help educate the copyright owners and artists whose rights are at stake. In other words, Sirius XM wants the benefits of the rate court (access to all commercially released sound recordings at a low government rate), while simultaneously trying to prevent copyright owners from exercising their right to coordinate in rate court proceedings and negotiations, or even to learn about the basic facts of the case.

2.SiriusXM is complaining about rates set by the government, not by SoundExchange. While we advocate for higher rates on behalf of our members and ensure they are informed about their rights, it’s ultimately the CRB that sets the statutory rates. While SiriusXM claims that it was “harmed” by having to pay a government rate for the use of content, nothing could be further from the truth. The CRB does its due diligence to ensure the government rates meet a “fair” and “reasonable” standard. In fact, in the past the rates for the musical content from which SiriusXM benefits have actually been artificially low. The idea that SiriusXM “has been forced to deal exclusively with SoundExchange to acquire statutory licenses at higher prices” is not only absurd, it’s completely contrary to the statutory process that has helped its business thrive.

3.Sirius XM’s suggestion that SoundExchange has any ability to “choke out competition” is outrageous. SoundExchange has an obligation to the artists and labels it represents to advocate on their behalf and inform them about rate-setting proceedings in which the CRB determines the value of their recordings. SiriusXM, on the other hand, is telling record labels to take its offers – at a significantly lower rate – or risk decreased airplay of their content. SirusXM, the only satellite radio provider entrusted to use the public airwaves for its own commercial benefit, is threatening to alter its programming based upon which labels take its offer. We have to question: who is really leveraging its market power here at the expense of the record labels?

4.Simple economics drove so many record labels to turn down Sirius XM’s direct licensing offers. SiriusXM’s entire complaint depends on the notion that some record labels rejected it offers because of “pressure tactics,” but the complaint itself makes clear why many labels did just that. SiriusXM was offering the record labels a rate that was lower than the already low rate set by the CRB, and yet SiriusXM expected to receive even more rights to their sound recordings in return. In other words, they were demanding more rights for less money. The fact that so many record labels turned down this deal is hardly surprising. It’s a matter of simple economics – not a conspiracy.

SoundExchange is proud of its efforts in supporting the creative community. We have every right to advocate for and educate the constituents we serve who put their heart and soul into the music they create. We are prepared for this challenge against Sirius XM – a multi-billion-dollar business built on the backs of the recording artists and record labels that make its very existence possible. We remain committed to our mission of protecting the long-term value of music, and ensuring that recording artists and record labels continue to receive the compensation they deserve.

The full Motion to Dismiss can be found here.

View SoundExchange’s October 2011 and August 2011 statements regarding the satellite royalty proceedings.

We are not privy to the discussions MRI is having about these direct licenses.  We can, however, provide some background about the statutory license for satellite radio, and what we do on behalf of the thousands of record labels and recording artists that we represent.

SoundExchange fights for artists and copyright owners

Unlike Sirius XM and MRI, we fight for royalty structures that recognize the vital role that the creators of music play for digital services.  We represent everyone in the creative process – record labels and recording artists – and we spend countless hours and millions of dollars fighting for their rights.  In the last satellite radio proceeding, we obtained a 300 percent increase in the rate paid by Sirius XM.  MRI, by contrast, works with services, and in past rate proceedings has closely coordinated with digital music services that sought to lower rates for creators’ music.     

SoundExchange manages the statutory license on behalf of the industry, and believes the current rates for satellite radio are below-market.

The statutory rates for satellite radio are set in proceedings before the Copyright Royalty Board (“CRB”) every five years.  SoundExchange represents artists and rights owners in those proceedings and advocates for rates that give proper weight to the value of music, and proper compensation to rights holders.  We’ve achieved dramatic increases in the statutory rates for webcasting and satellite radio in the past, and will always advocate to ensure the artist is paid rates that properly reflect the value of his or her music.

The current rates for satellite radio are based on a percentage of Sirius XM’s gross revenues, as defined in the regulations. For 2011, the rate is 7.5 percent, and will go up to 8 percent next year.  The proceeding to set rates for the next term is currently underway.  Importantly, Sirius XM also owes separate royalties for its other platforms, such as webcasting.  Those streams are not included in the 8 percent royalty rate described above.

As we’ve previously explained, SoundExchange believes the current rates are artificially low and will seek a substantial increase in the next term.  In the last rate setting proceeding, the CRB acknowledged that the evidence pointed to a market rate in the range of 13 percent, but then reduced the rate because of Sirius XM’s financial condition at the time.  We believe that it is no longer appropriate for musicians to be subsidizing Sirius XM. 

Currently, artists participate directly and immediately in the royalties paid to SoundExchange under the statutory license. With direct licenses, they will not.

SoundExchange administers a statutory license designed by Congress to ensure that artists participate directly in the stream of royalties generated by the digital performance right.  Under the statutory license, 45 percent of the performance royalties are paid directly to featured artists, whether or not they are “recouped” – or still owe money to their record labels. Recouped or not, the statutory license ensures artists are able to receive royalty payments from SoundExchange. In addition, through SoundExchange, 5 percent of performance royalties are paid to a fund for distribution to non-featured artists – again, without passing through a record label.  The ability of artists to participate directly and immediately in this new and growing stream of revenue is a core policy of the statutory license. 

SoundExchange is a non-profit organization with a passion for music

SoundExchange represents thousands of artists and labels, and is governed by a Board comprised of varying interests in the industry – half representing artists and half representing labels. As a non-profit organization, we are not overseen by any particular commercial interest. Instead, we advocate the interests of all creators. Our incentive is to ensure that artists receive their proper compensation, and our goal is to keep our operating costs as low as we reasonably can to maximize the royalties that we pay out to the creators and owners of music. We’ve been successful, paying more than $800 million in performance rights royalties to date.

The statutory license, as administered by SoundExchange, is transparent and efficient for rights owners as well as artists

The statutory license is an extremely efficient tool for rights owners and artists as well as services, and generates value for everyone in the creative process, not just record labels.  SoundExchange distributes tens of millions of dollars every quarter to artists and rights owners who owe nothing to SoundExchange other than keeping their paperwork up to date. 

In addition, SoundExchange has one of the lowest administrative rates in the industry – if not the lowest.  For 2010, our administrative rate was 6.9 percent – which covers rate settings, royalty accounting, oversight, enforcement and audits on behalf of all or our members and other activities that labels otherwise might have to undertake themselves. All of this is covered by our 6.9 percent admin rate.

We strive to be transparent, efficient and accurate in everything that we do. The way we distribute royalties is spelled out by statute and regulations – under rules that we advocate – and we’ve always sought the maximum degree of precision from services that we can get.  Whenever possible, we distribute royalties according to exactly what a service played.  We devote substantial resources to registering labels and artists to ensuring that every penny is distributed to its rightful owner, and we continue to dedicate resources to correcting the insufficient data we receive from services. Our mission is representing the creators of music, and it’s a mission that we embrace with passion.

In recent weeks, SoundExchange has received many questions from our members about the statutory license royalty rates currently paid by Sirius XM for plays on satellite radio, as well as the status of the proceeding before the Copyright Royalty Judges to set new satellite radio rates.  So we wanted to take this opportunity to give you an update.   

As you may know, Sirius XM currently owes sound recording royalties equivalent to 7.5% of gross revenues (as defined in the regulations), and that rate is scheduled to rise to 8% in 2012.  The Judges set that rate back in 2007, based primarily on their review of privately negotiated licenses in the marketplace.  The Judges actually concluded that the appropriate “market rate” was 13% — but, based on what the Judges believed to be Sirius’s and XM’s precarious financial positions at that time, they adjusted the rate downward to the current levels. 

The new proceeding to set the statutory rate for 2013-2017 is now underway.  It is scheduled to begin in earnest later this year, and we can expect a decision from the Judges by the end of 2012. 

We have long been preparing for this proceeding, and are planning to seek a substantial increase in the statutory rate.  In other words, we plan to seek rates well in excess of the 2012 rate of 8%.

As in the past, we will present evidence of the rates reflected in current privately negotiated licenses in the marketplace.  Those rates may play a very significant role in the outcome.  Equally significant is the fact that SiriusXM – with its monopoly power in the satellite radio marketplace – has been announcing unprecedented earnings and profits.  Financial indicators which may have justified a downward adjustment in the rates in 2007 have reversed. Today, we believe that there is no reason that the statutory rate should remain artificially subsidized any longer. SiriusXM’s own public financial statements, as well as the glowing projections they tout to their investors, make that much clear. 

• Sirius and XM’s merger successfully closed and the consolidated company (which is now the nation’s only commercial satellite radio provider) has reduced its overhead costs.
• SiriusXM has gone from claiming to be on the brink of bankruptcy to experiencing record profits that are projected to grow even further in the coming years.
• SiriusXM’s revenues have risen dramatically over the past few years and are estimated to top $3 billion in 2011.
• SiriusXM’s subscriber levels are at an all time high (currently about 21 million subscribers) and are projected to continue increasing by over 1 million per year for the foreseeable future.
• SiriusXM’s stock price has increased significantly since 2009, improving over 75% during the past 12 months (as of 8/10/11).

More listeners than ever access great music by signing up with SIRIUS-XM, and they’re coming to hear YOUR tracks. Given their size, the amount of music they play, and their financial success, SiriusXM is one of the most significant payers of performance royalties to SoundExchange and as such, to you. In that regard, we have every interest in seeing satellite radio’s success continue.  But that success must be fairly shared with those who make the music that forms the very core of SiriusXM’s business.  We believe that if, as in the past, the Judges again review the evidence of marketplace licenses and consider SiriusXM’s current financial position, our industry should expect to see a significantly increased statutory rate.            

We are busily working toward that result, and will keep you all apprised of the progress of these important proceedings.  SoundExchange will continue to fight vigorously on behalf of both artists and copyright owners to make sure that the products of their hard work and investment is appropriately valued when it forms the very backbone of services like SiriusXM.

If you require immediate assistance, or would like to know the balance of the forthcoming check, please call customer care at 202-524-7839.  We regret the inconvenience.

In recent days, SoundExchange requested that access to Internet radio service SWCast.net be disabled by the hosting ISP in accordance with the provisions of the Digital Millennium Copyright Act and the ISP’s terms of service.

While regrettable, this step was necessary given SWCast’s repeated claims that it is a “provider of blanket music licensing and enhancement services” for online radio stations.  SWCast collected monthly fees from webcasters using its service, in exchange for (it claimed) satisfying all of the reporting and royalty obligations of its webcaster clients. Among the obligations specifically listed on its site are those reporting obligations and royalties paid to rights-holders by webcasters through SoundExchange. 

SWCast, however, does not provide the promised services.  Specifically, and despite its claims, SWCast has failed to abide by its obligations under the statutory license, did not pay anything to SoundExchange for years, and, as of the date of this letter, has not even attempted to make any payment to SoundExchange for any period after 2005.  SWCast has also never provided the reports of use that are clearly required by the statutory license.

SoundExchange repeatedly reached out to SWCast to seek its compliance, to no avail.  Accordingly, SoundExchange sent a letter requesting that the hosting ISP disable access to the SWCast site.  Individual webcasters who had been using SWCast’s services are free to rely on the statutory license going forward, either by submitting the necessary materials and payments to SoundExchange directly, or relying on a different third party service to submit such materials and payments on their behalf.  Learn more about SoundExchange’s Licensing 101.

Thousands of webcasters have been able to thrive and to provide valuable services to their listeners while operating legally under the statutory license. It’s unfair for SWCast or anyone else to use artists’ work without compensating them, and it’s unfair to the webcasters who believed they were abiding by the law.

We’re sorry that SWCast chose not to comply with the law, and we hope SWCast fans will find another (legal) provider by which to enjoy the tracks we all love. Meanwhile, we’ll be holding down the fort here, making sure that artists and copyright holders see returns on their hard work, and have the means to continue creating new music.

If you have any questions, please review www.soundexchange.com or feel free to contact our licensing and enforcement department at 202.559.0555 or L&E@soundexchange.com.

UPDATE: SWCast still has not made any royalty payments to SoundExchange for 2006-2011, it has never provided any reports of use as required by law. Note: NO progress has been made in the past weeks toward resolution of compliance. SoundExchange continues to ask that stations who had relied on SWCast indicate to us by May 6 how they intend to proceed under the statutory license.