In what could signal the beginning of the end of the performance royalties debate, XM says it has agreed to an annual fee based on a gross revenue scale -- what Internet streamers would prefer -- rather than a listener-hour scale.

XM Satellite Radio today agreed with the US Copyright Royalty Board to a performance royalties rate that's an escalating flat percentage of its adjusted gross revenues. Up to this point, the service was paying a third of a cent for every listener who pays attention for an hour.

The XM agreement is particularly important for Internet streaming broadcasters, who continue to await the fate of a bill being debated in Congress that would reject the higher rates set by the CRB, replacing them with rates based on the scale XM and Sirius had already been paying.

A rate hike for the satellite broadcasters could mean a similar hike in the base rate for Internet broadcasters, if the bill's supporters adhere to their goal of equalizing rates for all music services.

The final rate to which XM agreed today is significantly higher than what it had been proposing -- although XM's proposal was widely acknowledged to be so low as to be unattainable -- and also somewhat higher than it was already paying.

Last May, XM informed the US Securities and Exchange Commission that it was seeking a royalties rate of 0.88% (less than one percent) of its annual adjusted gross revenue. As it turns out, it agreed to a rate that begins at 6.0% up until 2008, then escalating by half of one percent per year to 8.0% by 2012.

By BetaNews estimates, XM may have agreed to royalty rates that are more than double what it most likely currently pays, based on the service's current ratings as estimated by Arbitron. Its first official report of satellite radio ratings computed to the same standard used for terrestrial radio, states XM has about 253,000 listeners for any given 15 minutes of time (aggregate quarter-hour). Based on those figures, it's likely that XM pays about $29.2 million annually in performance royalties to the SoundExchange organization.

Under the new scale, XM would pay royalties based on its adjusted gross revenue, not its ratings. In the third quarter of this year, it reported revenue of $287 million. Assuming that quarterly revenue is roughly flat for the year, the service could find itself paying nearly $69 million in royalties for 2007 -- 236% of BetaNews' estimate of its current royalties.

The alternative royalties rate XM proposed to the CRM would have it paying only $2.53 million for this year, by BetaNews estimates.

The agreement evoked this comment from XM chairman Gary Parsons this afternoon: "The music performance fees set by the CRB are in the range projected by many financial analysts who cover this industry."