SiriusXM has filed a lawsuit against SoundExchange and A2IM. The company alleges that the two organizations violated Section 1 of the Sherman Act and acted in concert with other organizations to interfere with the satellite's channel efforts to obtain cheaper direct licenses that pay royalty rates of 5% to 7% instead of the 8% statutory rate for master rights owners.
In alleging that SoundExchange and A2IM are engaged in antitrust behavior that is causing the satellite operator economic harm, SiriusXM is asking the court to enjoin the two organization's from interfering in its direct licensing efforts, and pay its legal fee and whatever economic damages the court determines SiriusXM has suffered.
The most significant redress it asks for, in terms of potential impact upon the U.S. music industry, is for SoundExchange to be dissolved and unwound on an orderly basis, or alternatively appoint an independent monitor to oversee SoundExchange's compliance with the antitrust laws for a period of 10 years.
Last summer, SiriusXM made a deal with MRI to try and obtain direct licenses with record labels, but were rebuffed by all four majors and most independent labels with only 80 signing on.
SiriusXM paid almost $200 million in performance royalties, and is the main source of revenues collected by SoundExchange.
SiriusXM alleges that SoundExchange and A2IM individually reached out to its members and through a combination or conspiracy to cause a boycott of the direct licensing efforts made on behalf of SiriusXM by MRI. SiriusXM contends it would have signed more labels if it weren't for those efforts.
In fact, SiriusXM alleges that the organization's launched "a coordinated attack" of its direct license initiative, orchestrated by SoundExchange. In addition to SoundExchange, the National Academy of Recording Arts and Sciences, the American Federation of Television and Radio Artists, and the American Federation of Musicians all allegedly reached out to their memberships in a communication designed to achieve a collective refusal to Sirius direct licensing program.
While paying a lower rate than the statutory mandated 8% royalty for 2012, the labels would have been paid directly, would have gotten comprehensive reports, and wouldn't be out the percentage that SoundExchange holds back to finance its operating expenses.
According to the Sirius lawsuit -- filed in Federal Court in the Southern District of New York the by the New York-based law firm Weil, Gotshal & Manges LLP -- SoundExchange is seeking rates of 13% to 20% for the period of 2013-2017. Moreover, it wants that percentage to exclude a carveout for any direct licensing deals that SiriusXM manages to sign, which would, in effect, mean that SiriusXM would pay the music it licenses directly twice -- once to the right holders and again to SoundExchange.
"We haven't received SiriusXM's complaint yet, and therefore we cannot comment on its allegations," a representative from SoundExchange said in a statement. "Based on what we've read in the press, however, SiriusXM's claims appear to be wholly without merit."
A2IM couldn't be reached for comment at deadline.