CRB sets royalty rates for satellite radio

Satellite merger?With controversy and legal action still taking place over the rates set for internet radio, the Copyright Royalty Board has fixed new rates for satellite radio services. Since there are only two satellite providers in the US, Sirius and XM are the only companies affected by the ruling.

The two satellite radio services have been given an entirely different deal than that handed down for webcasters. While internet radio was burdened with a per song fee, satellite radio has been given a favorable percentage of revenue model to work from.

These fees are the ones paid to SoundExchange for performance royalties. They are paid in addition to publishing royalties owed to such organizations as ASCAP.

Here is the fee structure as set by the CRB:

2007: 6%
2008: 6%
2009: 6.5%
2010: 7.5%

It took almost a year of legal hearings to arrive at this conclusion because the satellite providers and SoundExchange couldn’t agree on which revenue streams would be subject to this fee, and how much the fee should be. It looks like the broadcasters won this one.

Advertising and subscriptions fees are applicable revenue and subject to the royalty, while hardware sales and data service fees are not.

The broadcasters had hoped to pay only 1-2.5 percent, while SoundExchange had argued in favore of a starting percentage of 8, increasing to 23 percent over time.

So, this looks like a great ruling for the satellite radio industry. But does it seem strange to anyone else that the standards are so very different for internet and satellite radio services?

If SoundExchange isn’t happy with this, they do have until December 18, 2007 to file for a re-hearing, and 30 days from then to appeal the decision in a Washington U.S. Appeals Court. The same goes for the satellite radio companies as well, though I can’t see them being upset by this arrangement.

  • So, this looks like a great ruling for the satellite radio industry. But does it seem strange to anyone else that the standards are so very different for internet and satellite radio services?

    seems odd to me. the fact is, each of the two satellite services have more listeners than the internet services. secondly, the revenue stream is non-existent in the satellite world for the music services.

    what do the percentages vs. per play numbers mean? i believe it means satellite has friends in high places. thats fine with me because i listen to IM at home, in the car, and at work. but for struggling outfits like WAMU and other internet services are in for tougher times.

    id like to hear Cindy Baucom’s and Lee Michael Demsey’s takes on all this.

  • Jon Weisberger

    Well, the satellite services operate pretty differently from most webcasters. They don’t broadcast for free – they have a guaranteed minimum revenue stream per listener, known as a subscription fee. Most webcasters don’t have that. And satellite subscribers may be listening to music, or they may not; anyone want to guess how many Sirius subscribers never tune away from the Howard Stern channel? So the situations aren’t really comparable, and therefore it’s not surprising that different approaches to performer royalty payments would be on the table.

    Overhead costs aside, there’s a good chance that the revenue percentage vs. per-play royalty is a wash for the satellite services – and if not, they’re probably paying more with the former than the latter.

  • Jon Weisberger

    Oh, and as far as struggling operations go, it’s worth noting that both satellite services have yet to turn a profit. They just seem to understand better than some other folks do that paying the providers of their programming is part of the cost of doing business.