SoundExchange CEO Points to SiriusXM's Growth for Royalty Rate Increase Optimism

Robin Marchant/Getty Images for SiriusXM
SiriusXM Studios on June 12, 2015 in New York City. 

"The fact of the matter is our legal position has only improved over time since the last proceeding," Michael Huppe tells Billboard.

SoundExchange president and CEO Michael Huppe is optimistic about the current rate increase trial in Washington, DC, against Satellite Radio and "Preexisting" Subscription Services (SDARS III) -- the category solely used by SiriusXM.

The digital performing rights organization submitted its proposal in October and rebuttal testimony in February. The hearing before the U.S. copyright royalty judges started April 19 and will continue through May 18.

SiriusXM has more than 30 million subscribers, as of Q1 2016. Since 2013, the royalty rate has increased by .5 percent each year, from 9 to 11 percent (a percentage of monthly gross revenues).

The percentage of revenue rate requested by SoundExchange is 23 percent of gross revenues.

"The rate right now is 11 percent of revenue, so that's what they pay us for use of the recordings. Howard Stern and talk radio, sports radio and the Playboy channel are seven [percent] for the use of the recordings," Huppe tells Billboard.

In the current proceedings, the Copyright Royalty Board (CRB) will set rates for Jan. 1, 2018 thru Dec. 31, 2022 for SiriusXM's service, as well as for the cable/satellite TV music services provided by Music Choice and Muzak.

"The fact of the matter is our legal position has only improved over time since the last proceeding," says Huppe. "Part of what the judges do is they look at how the parties are performing, how the business model is working."

Adds Huppe, "SiriusXM has been incredibly successful in terms of building subscribers and their revenue and their EBITA [earnings before interest, taxes, and amortization] is getting better and better and better. So we feel we're in a good position to have a rate increase."

The proposal was submitted by law firm Jenner & Block, representing SoundExchange which, for the purpose of the suit, collectively includes Recording Industry Association of America (RIAA), Sony Music Entertainment, Universal Music Group, Warner Music Group, the American Association of Independent Music (A2IM), the American Federation of Musicians of the United States and Canada (AFM), and the Screen Actors Guild and American Federation of Television and Radio Artists (SAG-AFTRA).

After the hearing concludes in mid May, the parties will file "proposed findings of fact and conclusions of law" on June 14 and then "reply findings of fact and conclusions of law" on June 29. A date for closing arguments has not yet been scheduled. The CRB must issue its rate determination by Dec. 15, though that date is subject to change.