SoundExchange, the record industry body that administers sound recording performance royalties for digital (Internet, satellite, and cable) radio, has filed suit against SiriusXM for what it calls "a massive underpayment" for the period between 2007 and 2012.
According to SoundExchange, SiriusXM "took a number of impermissible deductions and exemptions in calculating its royalty payments... including deducting for pre-1972 sound recordings and certain channel packages containing music."
Federal law didn't protect sound recording copyrights until 1972 (older recordings are protected by state laws). As The Wall Street Journal explains, "Because of that, Sirius has never paid to use these songs, even though such oldies account for an estimated 10% to 15% of the satellite-radio company's total airplay, according to SoundExchange Inc. Sirius sets aside the revenue generated by these pre-1972 spins before it calculates the royalties it owes rights holders."
Last year the federal government (Copyright Royalty Board) set new statutory licensing terms for SiriusXM to cover a five-year period. According to that decision, the satellite broadcaster is to pay 9% of gross revenue this year, rising to 11% by 2017. Read more here.
Part of that settlement was an amendment that explicitly allows SiriusXM to cut its SoundExchange payment by subtracting the share of revenue from pre-1972 recordings from gross-revenue. This allowance for older recordings was not explicitly part of the licensing terms for the 2007-2012 period, however. The Journal reports that SoundExchange plans to present the new regulation (which it's appealing) as "evidence that such an exclusion didn't exist before."
The suit was filed yesterday in U.S. District Court for the District of Columbia. SoundExchange says it is seeking to recover "$50 to $100 million or more." We haven't yet seen a public comment from SiriusXM on the matter.
Read more in The Wall Street Journal here.