SoundExchange, the organization that collects and distributes music royalities (often referred to as the ominous "RIAA" but technically this is incorrect, SoundExchange represents the recording industry) has filed their rate increase propsals to the Copyright Royalty Board.
SoundExchange is asking Sirius and XM to pay 10% of revenues, or $1.10 per subscriber, with a "gradual" increase over the term to a "reasonable rate" of 23%, or $2.75 per subscriber, by 2012.
Analysts estimate that XM and Sirius pay 4%-5% of their revenues to the music industry. Note that The Washington Post is reporting this figure to be 6.5%-7%, but I've read different. This figure is actually not publically disclosed, so this is all based on estimates. Either way, SoundExchange considers whatever they pay to be too low.
The current agreement expires December 31st, 2006.
In response, both Sirius and XM have proposed a rate of 0.88% of gross subscription revenue for the six year period, plus advertising revenues on the music channels.
The Copyright Royalty Board will hold hearings before it decides on new rates. This process could take over a year to go through, during which time XM and Sirius will pay their current rates. If an increase is decided, both satellite radio companies will have to pay the difference retroactively. The music industry cannot withhold music pending resolution of the agreement either.
Remember, this has nothing to do with device-specific issues that the RIAA has filed suit against XM and settled with Sirius over the Inno and S50 respectively. These proceedings are purely over the Compulsory Licenses that grant Sirius and XM the ability to pay music. Also note that XM has already reached a 5-year agreement with ASCAP (BMI and SESAC are the other organizations that represent songwriters and music publishers).
Both XM and Sirius take issue with SoundExchange's concept of increasing rates over time - stating that the value of a performance shouldn't change - that makes sense, and 23% is just plain ridiculous. But perhaps a middle ground can be reached? Say somewhere in between 0.88% and 10%? Hard to say, but the final outcome for this is a long ways away.
"..plus advertising revenues on the music channels."
I like this offer. Hell, pay 'em double the advertising revenue from the music channels.
Beat me to it Rich.:-D
That little line interests me more than anything else about this story. Sounds like a plan for commercials on the music channels is already in the works.
"...Sounds like a plan for commercials on the music channels is already in the works."
That would suck. Luckily, I still have my iPod...
I think the direction that XM and Sirius could do to make money from the music channels is to sell sponsorships of the music channels, more like underwriting than commericals.
For example, Verizon could sponsor the 20 on 20 on XM (or Sirius Hits 1) and refer to it as the "verizon countdown" and include probably like a promotion / contest website (verizon.com/xmcontest) where Verizon users can sign up to win 10 Vcast songs, free phones, etc.
In fact, one of the interesting ideas would be to sell a channel. Perhaps Cadillac could launch a specific channel to themselves, like a "Led Zep" channel for a month, and at the top of the hour they could play the song in their commerical and remind everyone they are listening to the "Lep Zep Channel on XM, sponsored by Cadillac and the new SCS"
You could include the website of the brand on the text readouts on all units and pictures on the Innos with the brand without running :60 spots.
Similar things like a "rolling stones weekend brought to you by Nautica.."
Perhaps special "live concerts" can be promoted with sponsor names.
Points is (other than I should be working for XM and/or Sirius) there are ways to advertise without using commercials. People just havent thought about them yet.
Where are you getting this "plus advertising revenues on the music channels" stuff ? There is nothing on the Washington Post article about this.