Among SoundExchange’s top 2012 priorities are its efforts to overhaul its royalty distribution platform, and the technology and processes from which its core business operates. In addition, SoundExchange is improving data quality reported by services and gathering repertoire data from record labels and recording artists; the result will be a single, authoritative repertoire database that will benefit the entire music industry. SoundExchange has already made headway in our continued artist and label outreach efforts. Together with partner organizations, more than 15,000 new artists and copyright holders were registered in 2011 — totaling 30,000 in the past three years alone!

Considering all these new benchmarks, there is one constant reoccurring theme: The music industry is undergoing a major digital shift, and one that has given artists and record labels new hope for the future of music. And SoundExchange is at the center of this exciting transition.

SoundExchange continues to provide a fast-expanding stream of revenue to the digital music industry. Digital music listening is expanding at a steady clip, with consumers having more free and subscription digital listening options – including consumer devices like phones, computers and even cars. And while according to International Federation of the Phonographic Industry (IFPI) digital revenues increased by eight percent to $5.2 billion worldwide, SoundExchange’s royalty payments to artists and labels have grown 17 percent to an estimated $292 million in 2011. That’s nearly triple from 2008. Overall SoundExchange distributions from inception to date now exceed $900 million.

“SoundExchange is now the number two digital revenue source behind iTunes for many record labels in the U.S. Since our first substantial distribution in 2005 of $20 million, the number of people listening to the type of music services we collect on continues to explode,” said Michael Huppe, president, SoundExchange. The organization’s work is responsible for creating new revenue streams and enabling new business models for the music community. “What excites me most is where we’ll be in the next five years, and the countless ways we can serve the music community. We’re optimistic about the industry’s future, and about the tremendous value SoundExchange promises to deliver in the years to come.”

As we explain in our motion to dismiss, we believe the complaint should be tossed out of court for at least the following reasons:

1.SiriusXM sued SoundExchange due to its role in helping record labels collectively negotiate the statutory license — the very activity that Congress specifically encouraged. When it created the statutory license for licensing digital music performances, Congress provided copyright owners the ability to work together in rate negotiations for the use of their digital performances. This ability made good policy sense; otherwise the parties would have difficulty making the license work properly. Congress also decided that if the copyright owners and services didn’t reach agreement, copyright owners would not have the right to walk away as they would with traditional negotiations. Instead the rates would be set by the Copyright Royalty Board (CRB). Sirius XM is trying to prevent SoundExchange from engaging in even the most basic efforts to help educate the copyright owners and artists whose rights are at stake. In other words, Sirius XM wants the benefits of the rate court (access to all commercially released sound recordings at a low government rate), while simultaneously trying to prevent copyright owners from exercising their right to coordinate in rate court proceedings and negotiations, or even to learn about the basic facts of the case.

2.SiriusXM is complaining about rates set by the government, not by SoundExchange. While we advocate for higher rates on behalf of our members and ensure they are informed about their rights, it’s ultimately the CRB that sets the statutory rates. While SiriusXM claims that it was “harmed” by having to pay a government rate for the use of content, nothing could be further from the truth. The CRB does its due diligence to ensure the government rates meet a “fair” and “reasonable” standard. In fact, in the past the rates for the musical content from which SiriusXM benefits have actually been artificially low. The idea that SiriusXM “has been forced to deal exclusively with SoundExchange to acquire statutory licenses at higher prices” is not only absurd, it’s completely contrary to the statutory process that has helped its business thrive.

3.Sirius XM’s suggestion that SoundExchange has any ability to “choke out competition” is outrageous. SoundExchange has an obligation to the artists and labels it represents to advocate on their behalf and inform them about rate-setting proceedings in which the CRB determines the value of their recordings. SiriusXM, on the other hand, is telling record labels to take its offers – at a significantly lower rate – or risk decreased airplay of their content. SirusXM, the only satellite radio provider entrusted to use the public airwaves for its own commercial benefit, is threatening to alter its programming based upon which labels take its offer. We have to question: who is really leveraging its market power here at the expense of the record labels?

4.Simple economics drove so many record labels to turn down Sirius XM’s direct licensing offers. SiriusXM’s entire complaint depends on the notion that some record labels rejected it offers because of “pressure tactics,” but the complaint itself makes clear why many labels did just that. SiriusXM was offering the record labels a rate that was lower than the already low rate set by the CRB, and yet SiriusXM expected to receive even more rights to their sound recordings in return. In other words, they were demanding more rights for less money. The fact that so many record labels turned down this deal is hardly surprising. It’s a matter of simple economics – not a conspiracy.

SoundExchange is proud of its efforts in supporting the creative community. We have every right to advocate for and educate the constituents we serve who put their heart and soul into the music they create. We are prepared for this challenge against Sirius XM – a multi-billion-dollar business built on the backs of the recording artists and record labels that make its very existence possible. We remain committed to our mission of protecting the long-term value of music, and ensuring that recording artists and record labels continue to receive the compensation they deserve.

The full Motion to Dismiss can be found here.

View SoundExchange’s October 2011 and August 2011 statements regarding the satellite royalty proceedings.

We are not privy to the discussions MRI is having about these direct licenses.  We can, however, provide some background about the statutory license for satellite radio, and what we do on behalf of the thousands of record labels and recording artists that we represent.

SoundExchange fights for artists and copyright owners

Unlike Sirius XM and MRI, we fight for royalty structures that recognize the vital role that the creators of music play for digital services.  We represent everyone in the creative process – record labels and recording artists – and we spend countless hours and millions of dollars fighting for their rights.  In the last satellite radio proceeding, we obtained a 300 percent increase in the rate paid by Sirius XM.  MRI, by contrast, works with services, and in past rate proceedings has closely coordinated with digital music services that sought to lower rates for creators’ music.     

SoundExchange manages the statutory license on behalf of the industry, and believes the current rates for satellite radio are below-market.

The statutory rates for satellite radio are set in proceedings before the Copyright Royalty Board (“CRB”) every five years.  SoundExchange represents artists and rights owners in those proceedings and advocates for rates that give proper weight to the value of music, and proper compensation to rights holders.  We’ve achieved dramatic increases in the statutory rates for webcasting and satellite radio in the past, and will always advocate to ensure the artist is paid rates that properly reflect the value of his or her music.

The current rates for satellite radio are based on a percentage of Sirius XM’s gross revenues, as defined in the regulations. For 2011, the rate is 7.5 percent, and will go up to 8 percent next year.  The proceeding to set rates for the next term is currently underway.  Importantly, Sirius XM also owes separate royalties for its other platforms, such as webcasting.  Those streams are not included in the 8 percent royalty rate described above.

As we’ve previously explained, SoundExchange believes the current rates are artificially low and will seek a substantial increase in the next term.  In the last rate setting proceeding, the CRB acknowledged that the evidence pointed to a market rate in the range of 13 percent, but then reduced the rate because of Sirius XM’s financial condition at the time.  We believe that it is no longer appropriate for musicians to be subsidizing Sirius XM. 

Currently, artists participate directly and immediately in the royalties paid to SoundExchange under the statutory license. With direct licenses, they will not.

SoundExchange administers a statutory license designed by Congress to ensure that artists participate directly in the stream of royalties generated by the digital performance right.  Under the statutory license, 45 percent of the performance royalties are paid directly to featured artists, whether or not they are “recouped” – or still owe money to their record labels. Recouped or not, the statutory license ensures artists are able to receive royalty payments from SoundExchange. In addition, through SoundExchange, 5 percent of performance royalties are paid to a fund for distribution to non-featured artists – again, without passing through a record label.  The ability of artists to participate directly and immediately in this new and growing stream of revenue is a core policy of the statutory license. 

SoundExchange is a non-profit organization with a passion for music

SoundExchange represents thousands of artists and labels, and is governed by a Board comprised of varying interests in the industry – half representing artists and half representing labels. As a non-profit organization, we are not overseen by any particular commercial interest. Instead, we advocate the interests of all creators. Our incentive is to ensure that artists receive their proper compensation, and our goal is to keep our operating costs as low as we reasonably can to maximize the royalties that we pay out to the creators and owners of music. We’ve been successful, paying more than $800 million in performance rights royalties to date.

The statutory license, as administered by SoundExchange, is transparent and efficient for rights owners as well as artists

The statutory license is an extremely efficient tool for rights owners and artists as well as services, and generates value for everyone in the creative process, not just record labels.  SoundExchange distributes tens of millions of dollars every quarter to artists and rights owners who owe nothing to SoundExchange other than keeping their paperwork up to date. 

In addition, SoundExchange has one of the lowest administrative rates in the industry – if not the lowest.  For 2010, our administrative rate was 6.9 percent – which covers rate settings, royalty accounting, oversight, enforcement and audits on behalf of all or our members and other activities that labels otherwise might have to undertake themselves. All of this is covered by our 6.9 percent admin rate.

We strive to be transparent, efficient and accurate in everything that we do. The way we distribute royalties is spelled out by statute and regulations – under rules that we advocate – and we’ve always sought the maximum degree of precision from services that we can get.  Whenever possible, we distribute royalties according to exactly what a service played.  We devote substantial resources to registering labels and artists to ensuring that every penny is distributed to its rightful owner, and we continue to dedicate resources to correcting the insufficient data we receive from services. Our mission is representing the creators of music, and it’s a mission that we embrace with passion.

In recent weeks, SoundExchange has received many questions from our members about the statutory license royalty rates currently paid by Sirius XM for plays on satellite radio, as well as the status of the proceeding before the Copyright Royalty Judges to set new satellite radio rates.  So we wanted to take this opportunity to give you an update.   

As you may know, Sirius XM currently owes sound recording royalties equivalent to 7.5% of gross revenues (as defined in the regulations), and that rate is scheduled to rise to 8% in 2012.  The Judges set that rate back in 2007, based primarily on their review of privately negotiated licenses in the marketplace.  The Judges actually concluded that the appropriate “market rate” was 13% — but, based on what the Judges believed to be Sirius’s and XM’s precarious financial positions at that time, they adjusted the rate downward to the current levels. 

The new proceeding to set the statutory rate for 2013-2017 is now underway.  It is scheduled to begin in earnest later this year, and we can expect a decision from the Judges by the end of 2012. 

We have long been preparing for this proceeding, and are planning to seek a substantial increase in the statutory rate.  In other words, we plan to seek rates well in excess of the 2012 rate of 8%.

As in the past, we will present evidence of the rates reflected in current privately negotiated licenses in the marketplace.  Those rates may play a very significant role in the outcome.  Equally significant is the fact that SiriusXM – with its monopoly power in the satellite radio marketplace – has been announcing unprecedented earnings and profits.  Financial indicators which may have justified a downward adjustment in the rates in 2007 have reversed. Today, we believe that there is no reason that the statutory rate should remain artificially subsidized any longer. SiriusXM’s own public financial statements, as well as the glowing projections they tout to their investors, make that much clear. 

• Sirius and XM’s merger successfully closed and the consolidated company (which is now the nation’s only commercial satellite radio provider) has reduced its overhead costs.
• SiriusXM has gone from claiming to be on the brink of bankruptcy to experiencing record profits that are projected to grow even further in the coming years.
• SiriusXM’s revenues have risen dramatically over the past few years and are estimated to top $3 billion in 2011.
• SiriusXM’s subscriber levels are at an all time high (currently about 21 million subscribers) and are projected to continue increasing by over 1 million per year for the foreseeable future.
• SiriusXM’s stock price has increased significantly since 2009, improving over 75% during the past 12 months (as of 8/10/11).

More listeners than ever access great music by signing up with SIRIUS-XM, and they’re coming to hear YOUR tracks. Given their size, the amount of music they play, and their financial success, SiriusXM is one of the most significant payers of performance royalties to SoundExchange and as such, to you. In that regard, we have every interest in seeing satellite radio’s success continue.  But that success must be fairly shared with those who make the music that forms the very core of SiriusXM’s business.  We believe that if, as in the past, the Judges again review the evidence of marketplace licenses and consider SiriusXM’s current financial position, our industry should expect to see a significantly increased statutory rate.            

We are busily working toward that result, and will keep you all apprised of the progress of these important proceedings.  SoundExchange will continue to fight vigorously on behalf of both artists and copyright owners to make sure that the products of their hard work and investment is appropriately valued when it forms the very backbone of services like SiriusXM.

If you require immediate assistance, or would like to know the balance of the forthcoming check, please call customer care at 202-524-7839.  We regret the inconvenience.

In recent days, SoundExchange requested that access to Internet radio service SWCast.net be disabled by the hosting ISP in accordance with the provisions of the Digital Millennium Copyright Act and the ISP’s terms of service.

While regrettable, this step was necessary given SWCast’s repeated claims that it is a “provider of blanket music licensing and enhancement services” for online radio stations.  SWCast collected monthly fees from webcasters using its service, in exchange for (it claimed) satisfying all of the reporting and royalty obligations of its webcaster clients. Among the obligations specifically listed on its site are those reporting obligations and royalties paid to rights-holders by webcasters through SoundExchange. 

SWCast, however, does not provide the promised services.  Specifically, and despite its claims, SWCast has failed to abide by its obligations under the statutory license, did not pay anything to SoundExchange for years, and, as of the date of this letter, has not even attempted to make any payment to SoundExchange for any period after 2005.  SWCast has also never provided the reports of use that are clearly required by the statutory license.

SoundExchange repeatedly reached out to SWCast to seek its compliance, to no avail.  Accordingly, SoundExchange sent a letter requesting that the hosting ISP disable access to the SWCast site.  Individual webcasters who had been using SWCast’s services are free to rely on the statutory license going forward, either by submitting the necessary materials and payments to SoundExchange directly, or relying on a different third party service to submit such materials and payments on their behalf.  Learn more about SoundExchange’s Licensing 101.

Thousands of webcasters have been able to thrive and to provide valuable services to their listeners while operating legally under the statutory license. It’s unfair for SWCast or anyone else to use artists’ work without compensating them, and it’s unfair to the webcasters who believed they were abiding by the law.

We’re sorry that SWCast chose not to comply with the law, and we hope SWCast fans will find another (legal) provider by which to enjoy the tracks we all love. Meanwhile, we’ll be holding down the fort here, making sure that artists and copyright holders see returns on their hard work, and have the means to continue creating new music.

If you have any questions, please review www.soundexchange.com or feel free to contact our licensing and enforcement department at 202.559.0555 or L&E@soundexchange.com.

UPDATE: SWCast still has not made any royalty payments to SoundExchange for 2006-2011, it has never provided any reports of use as required by law. Note: NO progress has been made in the past weeks toward resolution of compliance. SoundExchange continues to ask that stations who had relied on SWCast indicate to us by May 6 how they intend to proceed under the statutory license.

 Royalty payments to artists and copyright holders from a variety of digital streaming services reached $252 million in 2010, SoundExchange announced today. The year-end total surpasses any previous year’s distribution, and brings SoundExchange’s overall distributions during its first decade to more than $600 million.  SoundExchange collects these royalties from webcasting, satellite radio, television music channels and similar streaming platforms.

“These revenues are an industry success story, hinging on the collaboration of artists, copyright holders, streaming services, and the committed SoundExchange team,” said Michael Huppe, SoundExchange’s president. “This is part of the business equation that enables music creators to continue their extraordinary work, and when that happens, everyone wins.”

Payments collected and distributed by SoundExchange have been rising steadily since it was first appointed as the sole entity in the United States to administer streaming royalties on behalf of recording artists and copyright holders. SoundExchange receives playlist data provided by music services, collects corresponding royalty payments, and distributes those payments to registered artists and copyright holders.   

The royalty pay-out increases reflect several trends: the success and growth of streaming services; increased awareness among artists and copyright holders of the need to register with SoundExchange to claim royalty payments; and improved processing of previously unpayable balances through data clean-up.

“The dramatic increase in these royalties over the last several years indicates not only improvements on the process side, but the rising popularity of these kinds of services in the United States,” said Huppe. “Thanks to the innovative services offering access to music, people are consuming more music than ever before.”

Huppe also pointed to the rising subscribership and continued success of digital music services like Pandora and SiriusXM as a source of rising revenues. In 2009, SoundExchange negotiated groundbreaking business agreements with eight kinds of digital services, adapting rates to accommodate diverse business models, while ensuring continued revenues to artists and copyright holders. Cooperation since then has increased compliance by music services, Huppe said.

SoundExchange highlighted the need for artists and copyright holders to register to claim their share of these royalties. The organization registered almost 11,000 new artists and copyright holders in 2010 (more than double that registered in 2009), a development Huppe credited to extensive outreach and education efforts, as well as the organization’s rising industry profile. First-time registrations may also have contributed to the rise in individual payments, as new registrants may collect accrued back royalties. 

When compared to the prior year, the 2010 average payment for artists was up 80% (to $2,800) and for rights holders it was up 39% (to over $14,000).  New registrants are still able to collect several years of back royalties, often resulting in large first-time payouts.

CONTACT: LAURA ANDERSON 202-507-4659
LANDERSON@SOUNDEXCHANGE.COM 

ABOUT SOUNDEXCHANGE

SoundExchange is the independent, nonprofit performing rights organization that collects statutory royalties from satellite radio (such as SIRIUS XM), Internet radio, cable TV music channels and similar platforms for streaming sound recordings. The Copyright Royalty Board, which is appointed by the U.S. Library of Congress, has entrusted SoundExchange as the sole entity in the United States to collect and distribute these digital performance royalties on behalf of featured recording artists, master rights owners and independent artists who record and own their masters.  For more information about SoundExchange or to register, visit www.soundexchange.com

Who Pays SoundExchange? (2010) (View as PDF) (Download as Excel)

If you believe there is an error on this list, please contact our Licensing and Enforcement department (l&e@soundexchange.com or 202.559.0555). 

Please note that SoundExchange accepts payments from services, but cannot confirm the eligibility of these services for statutory licensing, and by accepting and distributing royalties, SoundExchange does not – and cannot – confirm whether a service is in fact eligible for or otherwise in compliance with the terms of the statutory license.  Similarly, simply because a service is on this list does not mean that the service is eligible to use the statutory license, has paid all amounts which may be owed pursuant to the statutory license, or is otherwise in compliance with the statutory license.