U.S. satellite radio provider Sirius XM has filed a lawsuit against SoundExchange and the American Association of Independent Music (A2IM), accusing the record industry organziations of interfering with its efforts to directly license the sound recordings. The complaint accuses SoundExchange and A2IM of being in violation of federal antitrust law, and New York state law.
The satellite radio firm, like webcasters, pays the owners of recording copyrights (that is, record labels) royalties to play music. Sirius XM reportedly pays SoundExchange 8% of its gross revenues for all the music it uses on its over-the-air programming, which SoundExchange distributes to the labels.
But this agreement ends this year, and the record industry will likely be pushing for significantly higher rates beginning in 2013. Moreover, Sirius XM says it wants a single license covering all its platforms (satellite, Internet, and mobile). So, "instead of relying exclusively on licenses either negotiated with SoundExchange acting as the record industry's collective or on the outcome of regulatory rate-making proceedings," Sirius XM felt it could get more competitive royalty rates by licensing music directly from the labels themselves, cutting SoundExchange out of the equation. In 2010, it began what it calls its Direct Licensing Initiative, offering labels rates of 5%-7% of "defined" revenues (see more RAIN here and here). Though they met with some success (Sirius XM says it has managed to secure almost 80 direct licenses with copyright owners), the company insists it would have been able to get many more if not for the alleged interference.
Sirius XM now contends that SoundExchange and A2IM, "along with major music industry organizations, have organized a boycott to prevent independent record companies from negotiating direct licenses with SiriusXM," alleging an "orchestrated effort" to prevent potential licensing partners from negotiating directly with Sirius XM.
Industry legal expert David Oxenford examines the implications of this news for webcast licensing, in today's B story.