Further Dealings: SoundExchange, SiriusXM, Arbitron/Nielsen Holdings

SoundExchange distributed $117.5 million of digital performance royalties in the first quarter, the largest amount it has ever distributed in that time period, up 11% from the $105.9 million in the prior quarter. But this year's first-quarter distribution was down from the $122.5 million and $134.9 million distributed in the third and fourth quarters of 2012, respectively. "Our first-quarter numbers show that this digital radio revenue stream is continuing to grow," SoundExchange president Michael Huppe said in a statement. Internet, satellite and cable radio services pay statutory royalties for the performance of sound recordings, which SoundExchange distributes to labels, performing artists and musician unions. SoundExchange collects royalties only from services that have elected to use the compulsory license allowed by U.S. copyright law. Thus, SoundExchange doesn't collect royalties if a service has negotiated royalty terms directly with labels. Currently, sources say Apple is negotiating such licenses with labels. SiriusXM has made direct deals with dozens of independent labels, and Clear Channel has made a handful of such deals with indies.

SiriusXM Satellite Radio launched its answer to Pandora on April 15. Called MySXM, the feature creates an interactive Internet radio service by allowing users to personalize existing SiriusXM stations. The feature is available to all subscribers of SiriusXM. MySXM, which is powered by Omnifone and the Echo Nest and uses apps created by QuickPlay Media, accesses more than 50 existing SiriusXM channels as a starting point, with more channels to be added in the future. Listeners use slider bars to create variations in channels' existing playlists to tweak characteristics. For example, the customization features for the Spectrum allow listeners to choose different levels of depth (less familiar to more familiar artists), era (older to more recent songs) and popularity (club artists to arena acts). MySXM puts SiriusXM in direct competition with Pandora and other Internet radio services, although unlike Pandora its usage requires a small amount of time and effort to fine-tune stations, making it more like Web radio service Slacker. The launch of MySXM doesn't mean SiriusXM, with nearly 24 million subscribers, considers itself an Internet radio service. The company has always seen satellite radio as its core mission and the Internet as a value-added service. Last year, former CEO Mel Karmazin called the Internet radio business model "a race to the bottom," noting that the company adds features like MySXM because customers want them, "not because we think it's good business sense."

The proposed purchase of Arbitron by Nielsen Holdings took a step closer to realization as nearly 77% of the radio ratings company's shareholders voted to approve the acquisition at its company's special meeting of stockholders. Announced in mid-December, the deal, which still requires U.S. regulatory approval, calls for Nielsen to acquire all outstanding shares of Arbitron common stock at the price of $48 per share. In March the Federal Trade Commission asked both companies for further information as part of the review process.


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