SoundExchange has filed a lawsuit against SiriusXM Radio that contends the satellite broadcaster “systematically underpaid” royalties from 2007 to 2011. The complaint, filed Aug. 26 in U.S. District Court for the District of Columbia, seeks compensatory damages of $50 million-$100 million plus late fees and interest.
The lawsuit boils down to accounting issues. SoundExchange takes issue with the way SiriusXM calculates its gross revenue, the basis for the royalties that labels and performing artists receive through SoundExchange. The more SiriusXM excludes from its gross revenue, the fewer royalties it pays to SoundExchange. The Turtles’ recent lawsuit against SiriusXM deals with recordings that were made before 1972 but centers on performance rights rather than accounting (Billboard, Aug. 17).
Unlike Pandora, which pays fixed royalties for every song it streams, SiriusXM pays royalties by applying a statutory rate to its gross revenue. The rate for satellite radio is 9% and ranged from 6% in 2007 to 8% in 2012. The rate is applied to revenue associated with music programming. Some revenue related to non-music programming can be excluded.
The complaint states that SiriusXM excluded revenue for performances of pre-1972 recordings as well as incremental revenue from three subscription packages. Pre-1972 sound recordings aren’t protected under federal law. However, SoundExchange believes SiriusXM was wrong to exclude those recordings from its royalty calculations.
SoundExchange also takes issue with SiriusXM’s exclusion of revenue from some subscription packages. SiriusXM excluded $3.50 per month from its Premier plan when calculating gross revenue, according to recent testimony by a SiriusXM executive. Premier costs $17.99 per month, not as an incremental $3.50 fee on top of the $14.49-per-month SiriusXM Select service. SoundExchange argues that SiriusXM would be allowed to exclude that $3.50 of incremental revenue only if the extra channels were offered for a separate charge.