SoundExchange Statement on Satellite Radio Royalty Proceedings

SoundExchange Statement on Satellite Radio Royalty Proceedings

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.