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SiriusXM Hit With Big Rate Hike by Copyright Royalty Board

In a victory for SoundExchange, satellite radio service SiriusXM will be increasing by 40% its royalty payments to artists and labels for the period beginning Jan. 1 and extending through 2022. The decision issued Thursday by the Copyright Royalty Board caps a 24-month litigation process that saw SoundExchange arguing that Sirius was underpaying in light of its revenues of $5 billion in 2016.

Sirius has been paying artists and labels at a rate of 11 percent, which now jumps to 15.5 percent. Although the CRB ruling fell short of the 23 percent hike SoundExchange was seeking, the increase is a significant victory for SoundExchange and its constituents at a time when hard-fought music royalty battles in the compulsory license space can result in increases that are incremental, if granted at all.

The CRB ruling, which was specific to pre-1998 satellite and cable radio services, saw the rates for Music Choice and Muzak reduced by one percent, to 7.5. Music Choice supplies music channels to cable systems while Muzak provides music services to Dish. At the time the companies’ previous rate hike was granted, they had planned to launch new services that have since been scrapped. The CRB rates cycle through five year terms.

“We thank the CRB for its work and appreciate their consideration of the case we laid out,” SoundExchange President and CEO Michael Huppe said in a prepared statement. “SoundExchange is dedicated to our mission of ensuring that creators are properly recognized and compensated for the use of their work. And while the Copyright Royalty Board did not adopt the rates we proposed for Sirius XM, its ruling demonstrates an important step in the right direction toward valuing the contributions of the music creators represented by SoundExchange.”

SoundExchange couched the CRB move as further evidence of “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 claims Sirius XM “has paid below-market rates for years” and says recording artists and rights owners have “subsidized” its growth.

As with the performing rights organizations that represent songwriters, SoundExchange has been lobbying Congress to move toward a free market approach so digital services are subject to “a willing buyer/willing seller standard” rather than the current system, which allows for the imposition of third-party royalties under compulsory license – settled by the CRB tribunal of three judges in the case of CMO’s like SoundExchange and a “rate court” for PROs ASCAP and BMI.

“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,” Huppe further stated in his comment. SiriusXM’s legal team declined comment, referring calls to the company’s communications team, who did not immediately respond.

SiriusXM now has a two-week opportunity to request reconsideration and will also be able to file a formal appeal after the decision is published in the Federal Register sometime early next year.

The American Federation of Musicians of the United States and Canada (AFM) was quick to voice qualified enthusiasm for the CRB decision. Ray Hair, AFM International president, said, “While we welcome the rate increase for SiriusXM, our broken copyright system still allows this wildly profitable company to underpay for recorded music based on a below-market standard.  It is time and past time to fix this broken system so that musicians can get fair value for their work across the board.  Every music service (including radio) should pay, all rates should be based on fair market value rather than requiring artists to subsidize businesses, and music services should be required to pay for the use of legacy as well as contemporary recordings.”

 

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