SoundExchange Proposes Fair Royalty Rates From Satellite Music Services For Artists And Record Labels
SoundExchange, the non-profit organization that collects and distributes royalties from various digital music services on behalf of artists and record labels, submitted its case to the Copyright Royalty Board ("CRB") charged with setting rates that XM & Sirius satellite music services will pay for their streaming of sound recordings during the next six-year license term, ending in 2012.
Recognizing that music forms the foundation for the two satellite services, SoundExchange's request for royalties beginning at 10 percent of revenues and gradually increasing over the six-year term is a reasonable rate based on the findings of several leading experts.
Today's submission is the beginning of a 12-18 month process which will result in a determination by the CRB of what it believes is a fair payment for the use of artists' and record labels' sound recordings. "The essence of satellite radio is music," said John Simson, Executive Director of SoundExchange. "Without music, XM and Sirius would not exist. We are asking simply that these companies recognize our substantial contribution to their business by paying a fair price to artists and record labels for their creativity and investment."
SoundExchange has included with its filing expert testimony from economists, technologists and survey experts. The testimony analyzes the value of the recordings using a number of factors including open market rates, the value of music to the satellite services' business model, rates paid by the satellite services for non-music content relative to value to subscribers, comparison with other digital music royalty rates, the value placed on sound recordings by customers, and survey data demonstrating that customers place music far above any other content when evaluating the value of satellite music services.
In a survey submitted to the CRB and conducted by Yoram Wind, marketing and survey expert and author of 21 books on these topics, and Professor of Marketing at The Wharton School at the University of Pennsylvania, almost half of all satellite radio subscribers surveyed (43 percent) said they would cancel their service (or would not subscribe in the first place) if satellite radio lacked music. That is triple the number of respondents who would cancel if any other type of programming were unavailable.
Simson noted that Congress allows digital streaming services like XM and Sirius to perform artists' work without the permission of the artist or the copyright owner. It is therefore critical artists receive fair payment since they do not have the option of withholding their sound recordings, a fundamental right in a typical negotiation. "The rate which the satellite radio providers seek in their submission is demeaning to artists and labels," said Simson. "When independent research shows music is the core of their business, and when they have the ability to pay $500 million to Howard Stern (and hundreds of millions to other non-music content providers), it is more than a stretch to regard their proposal as serious or fair. They clearly want to pay less than the true value of these works, forcing artists and copyright owners to subsidize their acquisition of other content."
Simson added, "Our rate proposal establishes a revenue sharing system that bases payment to artists and record labels on the success of these services. If they do well, payments increase; if they are less successful, the artists and labels are paid less. There can be no better evidence that we view this relationship as a partnership, and ultimately want XM & Sirius to flourish, but we want what's fair."
SoundExchange is jointly governed by artists and record labels and has a strong record of protecting the interests of artists and record labels. Since its first distribution in 2001, SoundExchange has collected and distributed more than $53 million in digital royalties. "SoundExchange has given me hope that there will be someone out there keeping track of the plays of my music and I know I will be compensated. I make the majority of my living from live performances and now I am more inspired to write and release music to the public since I know SoundExchange will have my back," said recording artist Kristine W.
"Artistic excellence results from tremendous personal sacrifice, great investment and unparalleled dedication. These creators deserve to get paid fairly for their efforts," added Simson.
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