Sirius XM

U.S. satellite radio provider Sirius XM has filed a lawsuit against SoundExchange and the American Association of Independent Music (A2IM), accusing the record industry organziations of interfering with its efforts to directly license the sound recordings. The complaint accuses SoundExchange and A2IM of being in violation of federal antitrust law, and New York state law.

The satellite radio firm, like webcasters, pays the owners of recording copyrights (that is, record labels) royalties to play music. Sirius XM reportedly pays SoundExchange 8% of its gross revenues for all the music it uses on its over-the-air programming, which SoundExchange distributes to the labels.

But this agreement ends this year, and the record industry will likely be pushing for significantly higher rates beginning in 2013. Moreover, Sirius XM says it wants a single license covering all its platforms (satellite, Internet, and mobile). So, "instead of relying exclusively on licenses either negotiated with SoundExchange acting as the record industry's collective or on the outcome of regulatory rate-making proceedings," Sirius XM felt it could get more competitive royalty rates by licensing music directly from the labels themselves, cutting SoundExchange out of the equation. In 2010, it began what it calls its Direct Licensing Initiative, offering labels rates of 5%-7% of "defined" revenues (see more RAIN here and here). Though they met with some success (Sirius XM says it has managed to secure almost 80 direct licenses with copyright owners), the company insists it would have been able to get many more if not for the alleged interference.

Sirius XM now contends that SoundExchange and A2IM, "along with major music industry organizations, have organized a boycott to prevent independent record companies from negotiating direct licenses with SiriusXM," alleging an "orchestrated effort" to prevent potential licensing partners from negotiating directly with Sirius XM.  

Sirius XM published a press release on the suit, which you can read here. There's coverage from The Wall Street Journal here, and Reuters here, Radio-Info here, and more here.

Industry legal expert David Oxenford examines the implications of this news for webcast licensing, in today's B story.

In Q3 2011, 11 million people listened to Pandora in their cars, according to data from MagnaGlobal's Media Access Quarterly. That's up from 6.3 million in 2010 (around 75% growth).

By comparison, MagnaGlobal reports Sirius XM had 19 million in-car subscribers in Q3 (up from 18 million; around 6% growth).

Two factors may have contributed to Pandora's growth, says MagnaGlobal: (1) more than 90% of cars now have auxiliary input jacks, perfect for hooking up smartphones, and (2) there are now over 100 million smartphones in the U.S.

Inside Radio has more coverage in today's newsletter, which you can subscribe to here.