Thursday, May 3, 2007

Satellite Royalty Rates: now and in the future

Yesterday at the Future of Music Coalition Policy Summit, I learned that XM and Sirius aren't paying royalties on a percentage of their revenues, they've been paying a flat annual fee for the last few years, "while they were getting started". Last year, that fee worked out to be under 3% of their revenues.

According to SEC filings:

XM revenue 2006: $925.55
Sirius revenue 2006: $636.01 million

Total Revenues for both satellite companies: $1.561 BILLION.

Yet SoundExchange states (on page 2 of this PDF) they've received $43 million in royalties for 2006. And that is ALL the royalties they've received, not just satellite radio. Yet 43 million is 2.8% of $1.561 billion. So we know that Satellite Radio is paying less than 2.8% of their revenues in royalties to SoundExchange. That's also less than half of what webcaseters are asking for in the Internet Radio Equaliy Act (which is 7.5%).

There are over 12 million XM and Sirius subscribers. At $12.99 a month, that's over $1.8 billion a year in revenues for satellite radio. SoundExchange said it anticipates collecting roughly $55 million to $60 million this year. That's still less than 3.3% of sat radio's gross revenues. And that is the total royalties they expect to collect, not excluding the revenues paid by webcasters and cable music services (like MusicChoice).

But SoundExchange and the RIAA are negotiating for higher rates for Satellite. According to Forbes.com, the CRB is considering new rates ranging from 10% to 23% of total revenue each year through 2012. That's a serious jump. And since webcasters would be trated the same way as satellite radio is if HR.2060 passes, these numbers are good to keep in mind.

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