Sirius XM Holdings Inc. will pay almost 41% more for the music it plays on its satellite-radio service starting next year, the federal Copyright Royalty Board decided late Thursday, though labels and artists feel the increase still falls short.
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Beginning in 2018, Sirius, the only satellite audio radio service in the U.S., will pay 15.5% of gross revenue through 2022. The rates for these types of compulsory, government-issued licenses that radio-type services rely on for music are decided every five years.
Recording Industry Association of America Chief Executive Cary Sherman called the decision "an important move in the right direction" but said "rates will remain short of what music creators actually deserve."
"For more than a decade, SiriusXM pocketed billions of dollars on the backs of music creators by paying below-market rates while the company crowed about record profits and boasted a market cap about the size of the entire recorded music market," said Mr. Sherman in a statement.
Sirius didn't immediately respond to requests for comment.
Sirius currently pays 11% of its revenue to SoundExchange Inc., which collects digital performance royalties on behalf of record companies and artists. SoundExchange then distributes that payout to artists and labels based on how often their music is played. By law, half goes to the copyright owner -- usually a record label -- and half goes to the performer of a song.
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SoundExchange had proposed the new rate for Sirius either be more than doubled to 23% of revenue or be $2.48 per subscriber a month in 2018 with moderate annual increases -- whichever is greater.
Sirius, citing "market conditions over the past several years," proposed the rate be "toward the lower end" of 8.1% to 11% of revenue, according to testimony.
Sirius had more than 32 million subscribers at the end of the third quarter. About five million of those get the service free as part of a promotion like those car companies frequently offer. It reported $5 billion in revenue last year.
Meanwhile, the Copyright Royalty Board lowered the rate paid for cable and satellite TV music services provided by Music Choice and Muzak. These "preexisting subscription services," which currently shell out 8.5% of gross revenue, will pay 7.5% for the next five years.
SoundExchange had proposed a rate of 1.9 cents per subscriber per month, with annual increases.
Music Choice declined to comment and Muzak didn't immediately respond to requests for comment.
SoundExchange CEO Michael Huppe said the decision highlights the need to change the standards by which satellite radio and cable radio services operate that allow the Copyright Royalty Board to set rates outside the market. SoundExchange has been urging Congress to subject all digital services to a "willing buyer/willing seller standard" that would reflect the open market.
"There's no reason recording artists and record labels should subsidize a company as profitable as Sirius XM," said Mr. Huppe. "Everyone should play by the same rules, and it is long past time for Congress to change the standard that currently forces music creators to subsidize flourishing companies whose success is built on top of the music."
Under U.S. copyright law, terrestrial radio broadcasters don't pay royalties to the recording owners or performers; they pay performance royalties only to songwriters and music publishers.
Last year Internet radio companies including Pandora Media Inc. and iHeartMedia Inc. began paying more for the music they play on their ad-supported services, but not as much as record labels and artists had hoped.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
December 15, 2017 15:06 ET (20:06 GMT)