Negotiations are well under way among key parties in the music industry over performance royalty rates for satellite digital music broadcasting rights, with, of course, a key role to be played by judges of the Copyright Royalty Board. Talent and stations are tussling over appropriate rates that compensate artists while also considering the continued success of digital music broadcasters via satellite feed. Closing arguments are scheduled for Oct. 16, with the current legislation of 2007 set to expire at the end of 2012.
SoundExchange is the sole nonprofit performance rights society selected by the board (which is appointed by the U.S. Library of Congress) to collect statutory performance royalties for 0satellite radio, internet radio, cable TV music channels and other related digital music streaming avenues. SoundExchange argues that the current rates paid by Sirius XM are far below market value, artists are not getting their fair share and there should be an increase from the current rate of 8% of satellite radio revenues to 13%, along with a .5% yearly increase that would set rates at 20% by 2017. Sirius XM has proposed rates of 5% to 7%.
Opponents say SoundExchange is seeking way too much, such that if the proposed rate increase took effect, extreme licensing agreements and additional costs on subscribers could suffocate satellite-radio digital-streaming. (See here.)
A bit of context may be worth considering in this matter: In 2007, the CRB approximated the going-market royalty rate at 13%. Service start-up costs — sending satellites into orbit — was an important factor the board considered in setting its 2007 rate at 6%. There then were two competitors, Sirius and XM, which have since merged into one, Sirius XM. In 2006-07, the firms racked up losses of $1.823 billion and $1.247 billion and free cash flow of $1.234 billion and $0.504 billion, respectively. But look now: Instead of losses and weak cash-flow, the 2012 guidance for the one firm is for free cash flow of $700 million; the net income of $0.4 billion in 2011 reveals start-up cost concerns have faded