SoundExchange’s suit is based on the argument that SiriusXM is improperly characterizing revenue as coming from its streaming product and not from its satellite distributed product enabling it “to grossly underpay the royalties it owes” by using a lower royalty calculation and rejecting the audit done by a third-party for its payments due in 2018.
The full suit can be read here.
A SiriusXM spokesperson replied with the following statement, “We were surprised to see the press release from SoundExchange that it had filed a suit against SiriusXM this morning in the United States District Court for the Eastern District of Virginia. SiriusXM has always respected the rights of creators and artists, and over the past ten years has paid SoundExchange royalties of over $5 billion dollars. Today, royalty payments from SiriusXM represent over 80% the statutory royalties that SoundExchange distributes to record labels and performers.
At the heart of today’s suit by SoundExchange are ordinary course disputes – an audit matter and an allocation of revenue from bundled products, specifically where subscribers pay for a package providing both our satellite radio product and the ability to stream our service. The regulations issued by the Copyright Royalty Board (CRB) governing SiriusXM’s royalty payments for satellite radio are carefully tailored with respect to such packages. The CRB requires SiriusXM to only pay royalties on revenue it earns for performances of sound recordings on its satellite service. Those same regulations require the Company to exclude from the royalty base revenue earned for activities that are covered by other licenses, including streaming.
SiriusXM has simply adhered to that clear regulatory framework, using a rigorous, tested and fair methodology to identify and allocate revenue for the streaming component of its bundled packages—a methodology completely consistent with precedent from the CRB. Furthermore, SiriusXM has been transparent with SoundExchange from the start on its methodology.
While we are disappointed with the actions taken by SoundExchange today, we remain committed to paying artists fairly for their work, and will continue to work collaboratively with SoundExchange, as we have for decades, to ensure they are paid properly under the governing regulations.”
SoundExchange, the premier music tech organization powering the future of music, announced today that the company filed a lawsuit against SiriusXM to recover substantial unpaid royalties and late fees owed under the Copyright Act for the use of sound recordings on the satellite streaming service. SoundExchange estimates that SiriusXM has wrongfully withheld more than $150 million in unpaid royalties over the past several years.
As the sole entity appointed by the United States government to collect and distribute digital streaming royalties under Section 114 of the Copyright Act, SoundExchange’s lawsuit, filed today with the United States District Court for the Eastern District of Virginia, maintains that SiriusXM improperly manipulated the federal regulations to create an artificially low calculation of “revenue” on which it pays creator royalties. Specifically, SiriusXM accomplished this by ascribing excessive and unjustified value to the webcasting component of its bundled packages and then removing that value from the satellite radio royalty pool.
In addition, SoundExchange is seeking to recover other unpaid royalties revealed in an audit of SiriusXM that showed the company had taken certain other improper deductions to reduce its calculation of satellite radio royalties.
“It is extremely unfortunate that we must bring this action on behalf of creators against SiriusXM,” said Michael Huppe, President and CEO of SoundExchange. “In recent years we have viewed SiriusXM as a willingly lawful and compliant company that shares our desire for a robust streaming marketplace. But SiriusXM has and continues to wrongfully exploit the rules to significantly underpay the satellite royalties that it owes. It is only because our repeated efforts to resolve this dispute have failed that we are forced to litigate on behalf of artists and rights owners upon whose hard work SiriusXM has built its business.”
SoundExchange is seeking compensatory damages and late fees for the multiple years of underpayments, as well as an injunction preventing SiriusXM from continuing to use inappropriate revenue calculations on its satellite radio payments going forward. To view the official filing, click HERE.
