BUSINESS

The Copyright Royalty Board Raises Rate for SiriusXM

Sirius XM New Year's Nation

Lowers Rate for Other Organizations

Increasing Rates

The Copyright Royalty Board has determined that SiriusXM will pay 15.5% of revenue from music played for the next five years beginning in 2018 to 2022. This means that SiriusXM will experience a 41% hike from the current 11% percent rate.

On news of the rate increase, the SiriusXM share price fell 5.1%, from $5.66 to $5.37. The current stock price for SiriusXM at the time of publishing was $5.35.

The Copyright Royalty Board has not posted the final determination on their website yet. Many involved parties are still scrutinizing the document to make sure proprietary data is not publicly revealed.

In the first nine months of this year, Sirius XM has generated net income of $691.3 million. That is roughly 14 cents per diluted share, on revenues of $4.02 billion.

SiriusXM did not acknowledge the Copyright Royalty Board’s decision on their website. They also have not responded to a request for comment. However, in a filing with the Securities and Exchange Commission, SiriusXM stated that they were in the review process. They also expect to evaluate changes in pricing, including the amount of their U.S. Music Royalty Fee.

Many people in the music industry have complained that SiriusXM rates are not set by “market” consideration. The company has one of the highest pay rates in the United States. It pays roughly $25-$30 per play, according to industry sources, and as disclosed in the Class Action settlement led by the Turtles.

SoundExchange

SoundExchange was hoping for a 23% rate from the Copyright Royalty Board. This rate increase fell short of that.

SoundExchange released the following statement:

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. 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

SoundExchange president and CEO Michael Huppe believes that there is no reason for recording artists and record labels to subsidize a company like Sirius XM. He has described the current standard as a subsidy for radio and television companies.

SoundExchange is a non-profit agency created by Congress. Thier purpose is to collect and distribute royalties to artists and labels. They also collect payments for music played by SiriusXM, Music Choice, and other programmed digital music services.

Other organizations

Upon hearing news about the rate, the Recording Industry Association of America said the decision is a move in the right direction but rates remain short of what music creators deserve.

Similarly, the American Federation of Musicians welcomed the rate increase. In spite of this, their president Ray Hair still believes that the copyright system is broken:

The current copyright system allows this wildly profitable company to underpay for recorded music based on a below-market standard.

MusicFIRST

MusicFIRST also expressed disappointment in the decision. The organization’s executive director Chris Israel made the following statement regarding the decision:

The rate SiriusXM will pay the artist may have changed but the facts surrounding the company’s sweetheart deal have not, This decision virtually guarantees the company will pay an unfair, below market royalty rate for the music that it plays well into the future.

The Copyright Royalty Board

The Copyright Royalty Board is a royalty setting tribunal created by Congress that is part of the U.S. Copyright Office of the Library of Congress.

In another move, the Copyright Royalty Board ruled that pre-existing subscription services, including Music Choice and Mood Media, will enjoy a reduced rate of 7.5% of revenue for the next five years. That is a reduction from the 8.5% of revenue that the two services are currently paying.

Copyright Royalty Board

Sirius, Music Choice, Mood Media, and Sound Exchange have 15 days to move for a rehearing. Once that process plays out, the Copyright Royalty Board will hand off the decision to the Register of Copyright. They then have 60 days to review the determination of legal error. If they choose to sign off on the decision, it will the Federal Register will publish it. At that point, parties have 30 days to appeal the conclusion to the U.S. Court of Appeals in D.C.

The music industry is also anxiously awaiting other rate-setting decisions from the Copyright Royalty Board. They have yet to determine the mechanical rate of a compulsory license that record labels and on-demand digital services have to purchase.

 

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David G.
the authorDavid G.