Seeking to reduce the overhead cost of paying performance royalties, SiriusXM has been trying to negotiate direct music licenses which avoid payments through SoundExchange and cut the amount to be paid by the satellite radio company. But it has had only limited success. Now SiriusXM has sued SoundExchange and a music trade group, charging that they are illegally interfering with its music license negotiations.
SiriusXM says it has sued SoundExchange and the American Association of Independent Music (A2IM) in the US district Court for the Southern District of New York (although the case does not yet appear in the court’s database). The complain charges that SoundExchange, A2IM and other record industry organizations have “orchestrated an illegal boycott” designed to choke off competition by blocking SiriusXM in its efforts to negotiate with individual record companies.
According to SiriusXM, “there has been an orchestrated effort against labels looking to negotiate directly with SiriusXM, including mailings to members, public statements released to the media and posted on their websites, board level discussions, direct pressure tactics placed on individual labels known to be considering SiriusXM’s offer and even overt efforts to cause one or more entities that actually signed a direct license to rescind it.” The complaint contends that such conduct violates the Copyright Act of 1976.
As a result of such conduct, SiriusXM says has been forced to deal exclusively with SoundExchange to acquire statutory licenses at higher prices than it otherwise would have obtained through direct licensing with individual record labels. The complaint contends that this conduct and the ensuing boycott violate federal antitrust laws and tortiously interferes in SiriusXM’s business relationships.
SiriusXM said it has signed nearly 80 direct licenses to date; and believes that “without the complained of conduct, it would have attained far more.” The satellite radio company said it believes that if SoundExchange, the trade associations and major record labels are allowed to continue this conduct, “it is likely that similar anticompetitive harm will result to other rights users who are unable to secure direct licenses to rights.”
RBR-TVBR observation: Broadcasters have no horse in this race and should steer clear of any involvement. The satellite radio guys, both Sirius and XM, willingly agreed to pay performance royalties before launching their services – even though it was unclear whether they had any legal obligation to do so. They created this mess, so let them deal with it.
Jack: I think that your observation that broadcasters have no horse in this race is not correct for any broadcaster who is streaming their programming on the Internet, as all streaming companies pay royalties, just like SiriusXM. If SiriusXM was able to license music in the marketplace at royalties lower than the rates that SoundExchange has claimed represent the rates that a willing buyer and willing seller would pay, that would present powerful evidence that Internet radio royalties are too high. Webcasting royalty rates will again be up for review in a proceeding beginning in 2014, and broadcasters should wish SiriusXM well in proving that the appropriate royalty rate is lower than what SoundExchange has been claiming. For more information on this issue, see my article on my blog at http://www.broadcastlawblog.com/2012/03/articles/music-rights/sirius-xm-brings-law-suit-against-soundexchange-alleging-collusion-to-stop-direct-licensing-of-music-impact-on-royalties/
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