Battle of the Royalty Rates: Sirius XM and SoundExchange Contest Recent Rate Hike

Attribution @StephanOhlsen
Attribution @StephanOhlsen

 

Sirius XM Radio Inc. (“Sirius”) and their royalty collection organization SoundExchange Inc. (“SoundExchange”) have asked the U.S. Court of Appeals for the District of Columbia Circuit to review the recent Copyright Royalty Board’s (“CRB”) decision to increase royalty rates from 11% to 15.5%. That represents a nearly 41% jump from the 11% the service was paying in the current year, although it’s short of the 23% that SoundExchange was advocating to the CRB judges. Filed on December 29, 2017, Sirius and SoundExchange’s separate petitions follow a long discussion on the underpayment of royalties to artists and “grandfathered” rates.

The Copyright Royalty Board ruled that Sirius XM had correctly discounted music royalty payments to SoundExchange for pre-1972 recordings. While some states provide protection, federal copyright law does not currently protect recordings made before 1972. Therefore, only composers or songwriters—not performing artists—are compensated when oldies are played by services such as Sirius XM. SoundExchange collects royalties for recording artists from digital services, and Sirius XM reduced its royalty payments to account for its use of pre-1972 records.

The CRB said that the satellite radio service should not have taken a discount for its Premier package, which includes a greater number of talk shows. Sirius’ Petition for Review (“PFR”), which can be found here, requests that that Court find the CRB’s ruling as “contrary to law, clearly erroneous, arbitrary and capricious, an abuse of discretion, and not supported by substantial evidence.” SoundExchange’s PFR, found here, simply requests a review of the Copyright Royalty Judges’ decision “as it relates to Pre-’72 Sound Recordings.”

Until the decision is reviewed and appealed, SoundExchange appears to consider the royalty rate increase as a win. In public statements, SoundExchange President and CEO Michael Huppe thanked the CRB for their work and decision. “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.”

Only time will tell whether the CRB’s decision to increase the royalty rates will be vacated, remanded or enjoined. In the meantime, there has been an introduction of legislation to create federal copyright protection for recordings made before 1972. Titled the “Compensating Legacy Artists for their Songs, Service and Important Contributions to Society Act” (“CLASSICS”), the bill was introduced to the House of Representatives on July 19, 2017 but has not made any progress from that point. Music industry giants such as the Grammys, Pandora and the Recording Industry Association of America have voiced support for the bill.

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