US satellite radio service SiriusXM has responded to a lawsuit filed against it by performance rights organization SoundExchange over the royalties owed to artists from satellite radio broadcasts.
In a statement issued Wednesday (August 16), SiriusXM said it was “surprised” and “disappointed” by the lawsuit, and argued its method of calculating the royalties it owes is “rigorous, tested and fair.”
In a lawsuit filed with the US District Court for the Eastern District of Virginia earlier the same day, SoundExchange argued that SiriusXM has “wrongfully withheld more than $150 million in unpaid royalties over the past several years.”
SoundExchange’s complaint alleged that SiriusXM had improperly reduced its calculations for the revenue it earns from satellite radio services, and inflated the amount it earns from its streaming radio service, in order to reduce the amount it owes in royalties to artists and copyright holders, which SoundExchange is tasked with collecting.
At present, the US Copyright Royalty Board requires royalty payments equal to 15.5% of gross revenue for satellite radio services, while royalties from streaming services are calculated differently, at a rate of $0.0030 per performance for subscription-based streaming services, and $0.0024 per performance for non-subscription streaming.
These rates don’t apply to streaming services that have their own licensing contracts with rights holders; they are the “statutory” rates for any satellite radio or streaming service that plays copyrighted music without prior permission. SiriusXM operates under the statutory rights system.
In its response on Wednesday, SiriusXM said it has “always respected the rights of creators and artists, and over the past ten years has paid SoundExchange royalties of over $5 billion… Today, royalty payments from SiriusXM represent over 80% [of] the statutory royalties that SoundExchange distributes to record labels and performers.”
SiriusXM continued: “At the heart of today’s suit by SoundExchange are ordinary course disputes – an audit matter and an allocation of revenue from bundled products, specifically where subscribers pay for a package providing both our satellite radio product and the ability to stream our service.”
It added: “The regulations issued by the Copyright Royalty Board (CRB) governing SiriusXM’s royalty payments for satellite radio are carefully tailored with respect to such packages. The CRB requires SiriusXM to only pay royalties on revenue it earns for performances of sound recordings on its satellite service. Those same regulations require the company to exclude from the royalty base revenue earned for activities that are covered by other licenses, including streaming.
“SiriusXM has simply adhered to that clear regulatory framework, using a rigorous, tested and fair methodology to identify and allocate revenue for the streaming component of its bundled packages—a methodology completely consistent with precedent from the CRB. Furthermore, SiriusXM has been transparent with SoundExchange from the start on its methodology.”
However, SoundExchange argues that SiriusXM is artificially inflating the revenue brought in by the streaming part of its satellite-and-streaming bundled packages, while lowering the revenue brought in by the satellite service, in order to reduce the royalties it pays.
In its complaint, which can be read in full here, SoundExchange says that an independent audit of SiriusXM’s revenue for 2018 “found Sirius XM had underpaid millions of dollars in royalties.”
The complaint states: “SiriusXM’s webcasting subscriptions do not constitute a material part of its subscriber base, as SiriusXM itself has acknowledged… SiriusXM has repeatedly given its webcasting service to existing [satellite radio] subscribers for free. Because SiriusXM was deriving zero additional marginal revenue from these [satellite radio] subscribers due to webcasting, it should have allocated only minimal additional revenue to webcasting, if any.”
“While we are disappointed with the actions taken by SoundExchange today, we remain committed to paying artists fairly for their work, and will continue to work collaboratively with SoundExchange, as we have for decades, to ensure they are paid properly under the governing regulations.”
SiriusXM
The lawsuit seeks compensatory damages to cover the amount owed, plus late fees and interest, as well as compensation for SoundExchange’s lawyer fees and court costs.
SiriusXM said that, despite the conflict over royalties owed, it plans to continue working with SoundExchange.
“While we are disappointed with the actions taken by SoundExchange today, we remain committed to paying artists fairly for their work, and will continue to work collaboratively with SoundExchange, as we have for decades, to ensure they are paid properly under the governing regulations.”
SoundExchange and SiriusXM have been at odds over royalty payments before, notably in a lawsuit that SoundExchange filed in 2013, alleging that SiriusXM had underpaid royalties for pre-1972 recordings aired on its satellite service, and for certain channel packages containing music.
That conflict was resolved in 2018, with an agreement that saw SiriusXM pay $150 million to SoundExchange to settle the claims.
SiriusXM is the only commercial satellite radio service provider in the US. It began offering a streaming version of its channels as part of various subscriber packages in 2017.
Sound Exchange is the only performance rights organization designated by the US Congress to collect and distribute digital royalty payments. In 2022, it collected $1.017 billion in digital royalties on behalf of around 600,000 artists.Music Business Worldwide
