The stage from which Ed Sheeran delivered a SiriusXM concert on Monday, August 14th, 2023. Photo Credit: SiriusXM/Kevin Mazur
SiriusXM (NASDAQ: SIRI) is facing a firmly worded lawsuit from SoundExchange, which says that the satellite radio giant “has unjustifiably withheld more than $150 million in royalties owed to artists and copyright owners.”
SoundExchange, which collects royalties for the use of recordings on non-interactive digital platforms, submitted the multifaceted action to a Virginia federal court today. According to the legal text, the aforementioned $150 million in allegedly due royalties resulted from SiriusXM’s “artificially” inflating the revenue attributed to webcasting in its satellite and online-radio packages.
Beginning on the satellite side, SiriusXM through 2027’s conclusion is required to pay 15.5 percent of gross revenue for a statutory license, the plaintiff emphasized in its suit. On the other hand, the Copyright Royalty Board sets rates separately for commercial webcasters, which are in 2023 obligated to cough up $0.0030 for each subscription performance and $0.0024 for each non-subscription performance.
Under the current regulatory framework, in order to escape paying both types of royalties (the percentage and the per-performance fee) on the same revenue, SiriusXM can exclude webcasting income (i.e., that deriving from streaming its programming) from the satellite radio revenue base.
Bearing in mind the point, SoundExchange has maintained that the defendant business (a substantial portion of which belongs to Liberty Media) “artificially inflates the value of its webcasting.”
SiriusXM’s exclusions go “far beyond avoiding the double-payment of paying multiple royalties on the same revenue” and instead flout “the undeniable truth that its webcasting service produces minimal marginal revenue (at best),” according to the legal text.
“Through its contrived and improper apportionment,” SoundExchange spelled out, “Sirius XM has engineered a windfall for itself and deprived artists of the important compensation to which they are legally entitled and desperately need.”
Regarding the specifics of this alleged “improper apportionment,” SoundExchange indicated that the defendant had in October of 2021 started attributing at least 17.8 percent of bundle-generated satellite revenue to webcasting, citing the results of “a private survey.”
Then, October of 2022 is said to have brought with it another collection of exclusion hikes, from 20.5 percent to 25.2 percent for the revenue behind its Platinum plan (which costs $23.99 per month), for instance.
Upon implementing this second boost, SiriusXM according to SoundExchange cited a 15,000-user survey, which, needless to say, ostensibly revealed that customers “valued its webcasting services even more than the 2021 survey had found.”
In any event, SiriusXM “could have used actual usage data to quantify how much its subscribers use” satellite versus streaming, per the plaintiff, which communicated that the 2022 exclusions had set in motion “a further underpayment of over $2 million per month.”
Lastly, SoundExchange took aim at SiriusXM’s alleged failure to turn over the details of said survey and the company’s purported “history of lowering its webcasting-only prices while raising its prices for the satellite radio/webcasting bundle.”
“As Sirius XM’s customers’ willingness to pay for webcasting falls behind while their willingness to pay for satellite radio grows,” SoundExchange wrote, “the allocation of revenue from the satellite radio/webcasting bundle to webcasting should accordingly move in the same direction. Ignoring its own pricing actions and marketplace realities, Sirius XM has done the exact opposite.”
Rounding out the in-depth complaint is a separate allegation that SiriusXM owes additional royalties (plus interest) from 2018. SoundExchange in 2019 enlisted Adeptus Partners to audit the appropriate usage financials, and this audit is said to have formally identified in September of 2022 an underpayment to the tune of “millions of dollars.”
“To date, Sirius XM has agreed that it owes only roughly 3% of that amount and refuses to pay the rest,” SoundExchange claimed.