First, SiriusXM has asked that the CLASSICS Act recognize that it has already licensed all of the pre-1972 works it uses. Let me repeat that: SiriusXM has already paid for all of the pre-1972 works it uses! In addition, this amendment would ensure that artists receive 50 percent of the monies under those existing licenses. Is that unfair? The Company wants to make sure that a fair share of the monies it has paid, and will pay, under these licenses gets to performers. Without this provision, artists may never see any of the money paid by SiriusXM for the use of pre-1972 works. And, again, we could hear the same unfair complaints that SiriusXM is not paying artists.
Second, SiriusXM thinks that the fair standard to use in rate setting proceedings is the standard that Congress chose in 1995 and confirmed again in 1998 -- which is called the 801(b) standard. In fact, it is the same standard that the record companies have lived under for decades when they license mechanical rights from music publishers. This is not a subsidy rate but rather a balanced standard that considers the interests of both content owners and music services. It is carefully crafted to reflect the reality of the highly concentrated music industry we operate in today. The willing buyer/willing seller standard functions well in competitive markets. In fact, it would work great if there were 100 labels to buy music from, but there isn't -- in an overwhelming majority of cases there are only three.
Third, SiriusXM is asking the simple question: "Why are we changing the rate court evidence standard for musical compositions in this legislation?" So, artists have agreed that they do not want to fight for terrestrial radio to pay sound recording royalties, SiriusXM has accepted that decision. But why is terrestrial radio given another break in rate court for the musical composition rights?
I freely admit that you really have to be an experienced copyright lawyer to understand how the music publishers want to change Section 114(i) of the Copyright Act, but buried in the fine print is another giveaway to terrestrial radio that the people behind this "consensus" legislation don't want you to see. The original version of MMA eliminated Section 114(i), which previously prevented rate courts from considering sound recording rates when setting musical composition performance royalties. By eliminating that provision, rate courts can consider sound recording performance rates, which could result in even higher rates for musical composition performance royalties.
NAB objected to the elimination of that Section 114(i), worried that radio rates could be increased due to master sound recording rates. After negotiations, radio got another exemption, so rates courts still cannot consider sound recording performance rates when setting musical composition performance rates for radio. But that's not the case for other services. The end result: The largest user of music -- and our direct competitor -- is likely guaranteed the lowest music performance royalty rates, while still not having to pay one cent to artists and labels for master sound recordings.
That is it -- that is the sum total of SiriusXM's objections. The Company believes that these amendments are reasonable, simple and straightforward. If this is really "consensus" legislation then let's include these amendments and see if we can move this industry forward together.
Patrick Donnelly is EVP and general counsel at SiriusXM.