SoundExchange

Significant growth of digital performance royalties, music subscriptions, and download sales pushed U.S. record industry revenues into positive territory in 2011 for the first time since 2004, the RIAA reports.

SoundExchange distributed $292 million in digital performance royalties (the fees webcasters and satellite radio pay to play copyright recordings) to labels and performers last year, an increase of 17% over 2010.

Music subscription services (e.g. Spotify) paid the industry $241 million in 2011, 13% more than in 2010.

And digital downloads accounted for $2.6 billion, up 17% from the prior year. For the first time ever in a a single year, digital album sales topped 100 million digital albums. In fact, the 9.2% overall digital sales growth offset the decline in physical decrease of 7.7%.

"Overall, digital formats comprised slightly above 50% of total music shipments in the United States, as digital became more than half the market for the first time ever," the RIAA press release reads. "No longer just a niche, digital music has shown it can be a model - or perhaps more accurately a variety of models - for the music industry going forward." Read it here.

The outcome of SiriusXM's lawsuit against SoundExchange and A2IM may be "very important to the future of digital music" -- webcasters included -- according to industry attorney and Davis Wright Tremaine partner David Oxenford (pictured).

The direct licenses SiriusXM has been trying to obtain could impact future CRB rulings, Oxenford writes, as such deals "between music users and rights holders are traditionally the best evidence of the value of music." That's a good reason why SoundExchange and A2IM would oppose such direct deals, says Oxenford.

He writes:

"Were SiriusXM to be successful in its suit, and if it is in fact able to negotiate direct music licenses for substantial catalogs of music at rates lower than what it has paid under previous rate decisions, it would presumably introduce such evidence in proceedings before the Copyright Royalty Board (which is now in the process of setting the rates for the public performance of sound recordings by SiriusXM over its satellite service for the next 5 years), and argue that these direct deals are the best evidence of what a willing buyer and willing seller would agree to in a competitive marketplace."

But direct licensing deals between SiriusXM and rights holders could also impact future Internet radio royalty rate decisions.

"One of the biggest issues in all rate proceedings heard before the CRB has been establishing what a willing buyer and willing seller would agree to pay in a competitive marketplace like the one for which the rates are being set," writes Oxenford. "In most cases, as there are no direct licenses, the CRB has to extrapolate what willing buyers and willing sellers would pay for sound recording performance royalties in a noninteractive market from evidence of what companies pay in other markets...

"Lower direct licensing rate could impact not only the rates paid by SiriusXM, but also other proceedings dealing with the sound recording royalty rate, including potentially proceedings for webcasting royalties (proceedings that will also affect the rates that broadcasters pay for streaming their signals)."

The next CRB proceeding for Internet radio begins in 2014 to set royalty rates for 2016-2020.

You can find Oxenford's full analysis of the SiriusXM lawsuit at the Broadcast Law Blog here.

Oxenford will interview U.S. Copyright Office General Counsel David Carson on-stage at RAIN Summit West 2012 in Las Vegas, on Sunday, April 15. You can find out more here.

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.  

Sirius XM published a press release on the suit, which you can read here. There's coverage from The Wall Street Journal here, and Reuters here, Radio-Info here, and more here.

Industry legal expert David Oxenford examines the implications of this news for webcast licensing, in today's B story.

Pandora has been enjoying some attention from business and mainstream media lately. The webcaster took the opportunity of the International Consumer Electronic Show last week to show off not only their latest audience numbers, but their growing set of automotive- and consumer electronics-alliances.

SoundExchange will host its first-quarter webinar for service providers (e.g. webcasters) Thursday, January 19.

SoundExchange is the recording industry agency that collects and distributes royalties for digital public performances of copyright sound recordings. They conduct quarterly webinars to answer customer questions. In fact, SoundExchange is encouraging attendees to submit questions they'd like addressed during the webinar when they register. Attendees can also "instant message" questions during the webinar.

Register for Q1Y12 Webinar for Service Providers (Thursday, January 19 3p-4p ET, 2p-3p CT) here.

Sirius XM is attempting to reduce the fees it pays for the use of copyright sound recordings by forging deals directly with record labels, and thus bypassing the statutory terms and SoundExchange.

(Read more here).

Artist unions and SoundExchange then protested the move in October. They called the effort "blatantly anti-artist." Read more here.