WASHINGTON, Dec. 4 /PRNewswire-USNewswire/ -- SoundExchange today expressed mixed reaction to the royalty rates announced by the Copyright Royalty Board (CRB) to be paid by satellite radio operators, XM and Sirius, to the artists and record labels whose music is the core of the satellite radio business. The decision dramatically increased the royalty rate paid by XM and Sirius, thereby validating the overwhelming evidence presented by SoundExchange regarding the critical importance of music to satellite programming.
The CRB also rejected virtually all of the evidence submitted by XM and Sirius. However, the congressionally-mandated standards that the CRB followed ultimately led it to set rates at half the value it determined artists and record labels would have received in the marketplace. "This result once again highlights the inequity of a rate standard that forces creators of music to subsidize certain music services with below market rates," said John Simson, Executive Director, SoundExchange, a non-profit organization that collects and distributes royalties from various digital music services on behalf of artists and record labels. "We are glad that the decision affirmed the importance of music to XM and Sirius, but disappointed that the rate standard led to a lack of full and fair compensation because of the business circumstances created by XM and Sirius," added Simson.
In its decision, the CRB said that the value of music to the satellite services should start at a benchmark of 13 percent of total subscriber revenue. However, due to a federal law requiring that any new royalty rate avoid creating an overly "disruptive" impact on the satellite services, the CRB reduced the royalty from the benchmark 13 percent to six percent in the first two years of the term, with a gradual increase to 8 percent in 2012.
During the proceedings, SoundExchange argued for rates starting at eight percent, while the satellite services argued for a royalty rate of approximately one percent. "While not agreeing to our rates, the CRB fully recognized that music is not free. It has value, and the people who invest in and create music deserve to be paid," said Michael Huppe, General Counsel of SoundExchange. "Though the final rate is below the actual value that music provides to these services, it nonetheless represents a significant increase over the royalties previously paid by satellite radio. As a result of this decision, recording artists and record labels are finally on the right track towards fair compensation," said Huppe.
As Congress directed, the CRB applied a standard based on factors unique to satellite radio in determining a royalty rate, as it did earlier this year (under a different congressionally mandated standard) in establishing new rates for Internet radio. Each type of music service has a different business model, with different risks and returns. The CRB is charged with considering these characteristics when determining the appropriate value of the music to that business. For example, a feature film has a certain value at the box office, something different on cable, and something different on free TV and another value when it goes to DVD. The same content can be valued differently on different platforms.
Congress allows all types of radio to broadcast sound recordings without the permission of the artist or the copyright owner. It is therefore critical that artists and labels receive fair payment for these uses since they do not have the option of withholding their sound recordings, a fundamental right in a typical negotiation. "Because artists and copyright owners cannot withhold content, it is extremely critical that they receive fair compensation, especially since more and more consumers access music through listening rather than purchasing," added Simson. "That said, we view the satellite services as our partners in bringing a greater variety of music to fans everywhere."
SoundExchange is an independent, nonprofit performance rights organization designated by the U.S. Copyright Office to collect and distribute digital performance royalties for recording artists and sound recording copyright owners (usually a record label) when their sound recordings are performed on internet radio and satellite radio (such as XM and Sirius), as well as other services. SoundExchange currently represents more than 3,500 record labels and more than 31,000 artists. SoundExchange members include both signed and unsigned recording artists; small, medium and large independent record companies; and major label groups and artist-owned labels.
For additional information please visit http://www.soundexchange.com/.
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