SoundExchange says new satellite royalties aren't enough

by Scott M. Fulton, III

Publicly splitting with the panel that had, up until yesterday, backed its proposed royalties hikes entirely, the agency that collects performance royalties said this morning the newly agreed-upon rate is unfair to artists.

"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," stated SoundExchange's executive director John Simson this morning, in response to new performance royalty rates agreed upon yesterday by XM Satellite Radio and the US Copyright Royalty Board.

The new rates, as BetaNews determined yesterday, are somewhat higher than XM and its current competitor and future partner Sirius currently pay, are much higher than XM and Sirius jointly proposed they should pay, but much lower than SoundExchange was hoping.

Sirius has yet to make a formal announcement, though it would appear that XM has been operating on the two companies' mutual interests in negotiations with the CRB, under the presumption that they will be merged entities next year.

SoundExchange wanted a base royalty rate of 8.0% of broadcasters' adjusted gross revenue, escalating by half a percent per year until it reached 13.0%. What it's getting instead is 6.0% for 2007 and 2008, escalating to 8.0% by 2012 and likely staying there.

In its statement this morning, SoundExchange implied that the pending merger of XM and Sirius may have created some kind of collusion -- what Simson called "the business circumstances created by XM and Sirius" -- that conspired to blind the CRB to the realities of what SoundExchange had argued performers require to make a living.

"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," stated SoundExchange general counsel Michael Huppe.

He then sounded a note, however, that implied that it could move to boost royalties yet again, saying, "As a result of this decision, recording artists and record labels are finally on the right track towards fair compensation."

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