Sirius Satellite Radio has confirmed that it has come to an agreement with Universal Music Group over the ability to save individual songs to portable satellite receivers that double as MP3 players. M

Sirius Satellite Radio has confirmed that it has come to an agreement with Universal Music Group over the ability to save individual songs to portable satellite receivers that double as MP3 players. Meanwhile, a source at Warner Music Group says they have a similar deal in place.

At issue is Sirius’ S50 device, which allows users to record up to 1 GB worth of music, and also disaggregate individual songs from the satellite stream to manage like any other MP3 file.

Music industry executives have said that the ability to save a song in such a way is a lost opportunity to sell that song, and as such, satellite services should compensate the labels in similar fashion to a sale. Labels and publishers threatened to sue Sirius for copyright infringement last year over the S50, according to sources. In December there was a "standstill" agreement, extending the deadline date to reach some resolution or settlement.

As early as last month, UMB eLabs president Larry Kenswil called such devices “cannibalization machines,” at an industry event in New York.

The details of the agreement are still unclear, but sources say Sirius has agreed to compensate UMG for the service and avert a potential legal showdown. Consumer charges will not be affected, according to a source.

Atleast two of the majors have resolved their differences with Sirius quickly. "Sirius and Warner Music Group's recorded music division have resolved the issues specifically related to the use of sound recordings in connection with the S50," emailed a Warner spokesperson. "Moving forward, the two companies are open to discussions to resolve issues relating to future products."

The deals are expected to act as a template for the other two major labels, similarly concerned with the timeshifting issue, with whom sources say Sirius is also in active negotiations.

It also puts pressure on Sirius rival XM Satellite Radio to strike agreements of its own. XM this January unveiled a similar portable timeshifting device—the Helix from Samsung—expected to become publicly available in April. While XM is also in active talks with the labels over their timeshifting concerns, no imminent deal is expected.

The National Music Publishers' Assn. has been negotiating with Sirius and XM over compensation for recorded music compositions delivered to the devices as well, says NMPA CEO/president David Israelite. Whether the compensation scheme will be set up as a blanket license to cover all songs within a publisher's catalog or some fee paid per song or per device has not been resolved. Antitrust laws prohibit the record labels from negotiating these licenses together as an industry, but not the publishers.

The agreement with Sirius and UMG is limited to the S50, but is considered a first step for coming to terms for any future timeshifting products as well. It’s also seen as a significant good faith measure for a separate ongoing debate over the licensing fees satcasters pay to broadcast music. The existing agreement expires at the end of this year.

Such inter-industry agreements are becoming increasingly crucial as the RIAA and NMPA continue to lobby Capitol Hill for further copyright protections. The Audio Broadcast Flag Licensing Act of 2006 was introduced March 2, which among other things seeks to mandate that audio broadcasts include an encryption technology that only devices that meet certain copyright protections standards can decode. If passed, consumer electronic manufacturers and service providers will have much less room to negotiate.

Looking forward, the high-definition radio industry is facing similar scrutiny by the music industry, for the same reasons. HD radios are capable of recording master-quality copies of music they broadcast, and are expected to feature similar timeshifting capabilities.

- Additional reporting by Susan Butler and Bill Werde, N.Y.