The first phase of the Copyright Royalty Board's trial to determine Satellite Radio's royalties was completed late last week.
XM and Sirius, as well as SoundExchange, both presented their cases from June 4th through June 28th, 2007.
There is now a break in the trial while the parties prepare their rebuttal cases. Rebuttal hearings are scheduled to take place August 15th through August 30th.
A witness for SoundExchange, Dr. Michael Pelcovits, was unavailable the week of June 25th and consequently, his testimony will take place on July 9th. MusicChoice was also supposed to be part of the hearings, but they have reached an agreement with SoundExchange, and therefore no further proceedings are necessary for them.
In their testimony, both Sirius and XM Satellite Radio requested a rate of 0.88% of gross revenue received, for the period from January 1, 2007 to December 31, 2012.
"Sirius has paid millions of dollars, and is willing to pay millions of dollars more, to the record companies for a performance right for which our primary competition - terrestrial radio - does not have to pay," said Mel Karmazin in his written testimony. "However, any fee must acount for the enormous costs incurred, risks faced and investments made by Sirius, and for the fact that our revenues must cover a host of functions that other licensees do not perform."
"Sound recording performances are available everywhere, for free," Karmazin continued. "The right to make those performances, at issue in this proceeding, does not drive our revenues."
"It is the skill behind XM music programming that makes XM music programming attractive to its subscribers," wrote Gary Parsons in his testimony. "But that value exists because of what XM contributes it does not flow merely from license to sound recordings."
"Moreover high royalty would be unfair to XM in light of the fact that XM's major competitors in broadcast radio do not pay any royalties whatsoever to sound recording labels or performers," continued Parsons. "A high royalty in this proceeding would further unfairly tilt the playing field in favor of terrestrial broadcasting, and could further distort competition in the radio industry."
SoundExchange on the otherhand, asked for a sliding scale of royalties - starting at 10% of revenue and growing to an incredible 23% of all revenue - increasing annually:
- For 2007, SoundExchange asks for 10% of all revenue, or $1.10 per month per subscription (whichever is higher)
- For 2008, the rate grows to 12% of all revenue, or $1.30 per month per subscription
- 2009: 15% of all revenue, or $1.60/subscription
- 2010: 18% of all revenue, or $1.95/subscription
- 2011: 20% of all revenue, or $2.35/subscription
- 2013: 23% of all revenue, or $2.75/subscription
Both propositions are for performance licenses with ephemeral (temporary) copies.
You can read the full testimonies of Sirius Satellite Radio, XM Satellite Radio as well as SoundExchange and MusicChoice on the CRB's website. More detailed information will be posted closer to the start of the rebuttal hearings.
"23% of all revenue", well, looks like I went into the wrong business.. that's more like highway robbery.. now its just a negotiating position, but it sure sounds like someone in that 'artist' organization has been hitting the crackpipe just a little tooo much..
"23% of all revenue" is a lot compared to Jimmy Schaeffler's piece of the NAB under the table monies.
It might be a lot but if what the CRB did to webcasters is any indication at all the greedy pricks will get it. Fuck RIAA and fuck NAB too! Satrad prices will go up because of this.
I'd guess that about 80% of the music played on XM and Sirius would NEVER be played on FM (which means no royaties for those songs). So many artists get exposure because of XM and Sirius and they want to end that....unreal.
to follow up on dualsub2006's comments
..and everytime sub prices go up, so does the payment, since they're based on a percentage of revenue. Talk about a death spiral, if the satcasters raise rates to pay escalating performance rights fees, then they owe more fees, so they raise fees, so they owe more fees, ad infinitum until no one can afford SDARS.
Here is the "Fuck" List:...
1 - "F" the RIAA
2 - "F" the MPAA
3 - "F" SoundExchange
4 - "F" the Copyright Royalty Board
5 - "F" the NAB
6 - "F" the "23% of all revenue"
Did I Miss Any?? Feel free to add on..
PHASE 1? It's been HOW many months already?
How many phases are there?!
It must be endemic in the music industry. A friend of mine runs a coffee shop and hosts open mic nights. ASCAP wanted a licensing fee for cover songs the musicians play, so he went to only allowing original music. Now those crooks at ASCAP want a licensing fee for the original works.
One other thing is that the panel will also decide on a fee going back to January of '06; XM and Sirius have been making payments under the old rules since then, but they're on the hook for a lump-sum payment of whatever the difference is between what they paid then and what they're found to owe.
My bet is that the copyright board rules that a flat 12% of subscription (not advertising) revenue is the new rate. Currently it's 7% of subscription+advertising. We'll probably see a final decision early next year.
Using a subscriber revenue ARPU of $10.15 for Sirius (the Q1 figure, IIRC), then that computes to $0.71 per month going to SoundExchange, meaning that the net sub ARPU is $9.44. If they want to retain that net ARPU with a 23% royalty rate, that means that the sub ARPU has to be $12.26. It may be difficult if not impossible to raise rates for the OEM promo subs, so that probably translates into a $15.95 service for those of us that are self-paying. My suspected 12% rate implies a new ARPU of $10.73, which could be accomplished with a rate increase to $13.95. The figures for XM are broadly similar (though with the added complexity of a GM revshare reset on roughly 3 million vehicles next year to 50% of revenue).
What the heck is with retroactive fees? Since when can you go BACK in time and charge fees?
Ridiculous. With its untenable position on performance royalties, its mafia-like shakedown suits against children, and the way it rips off both artists and consumers, I'm starting to think that we need competition in the music production royalty arena.
I guess it's OK to be a monopoly if you're giving the NAB something for free, but not if you compete with them