RAIN 4/12: 90% of SoundEx 2011 revenue just from SiriusXM and Pandora, says Live365 attorney

Michael Schmitt
April 12, 2012 - 11:40am

Angus MacDonaldAccording to new analysis from Live365 general counsel Angus MacDonald (pictured), 90% of SoundExchange's 2011 revenues "came from only two sources": SiriusXM and Pandora.

MacDonald estimates SiriusXM's royalty payments to SoundExchange to be around $200 million in 2011 (based on the company's judicially-filed complaint against SoundExchange from March 23, though "a small portion" of the figure may be non-U.S. statutory payments). And Pandora's royalty payments to SoundExchange totaled $136.3 million in the 12 months that ended January 31, 2012.

SoundExchange's total 2011 revenues were $371.9 million. Combined, Pandora and SiriusXM's royalty payments make up around 90% of SoundExchange's revenues.

"That is a staggering figure," comments MacDonald, "especially if you consider all of the major and not-so-major terrestrial broadcasters who must pay royalties to SX for their simulcasts, as well as all the other types of services that pay royalties to SX... This suggests that Sirius and Pandora have a good deal of leverage to extract a fair royalty deal from SX for their respective royalty proceedings in the CRB."

SiriusXM and Pandora make up 90% of SX's revenue in 2011The finding is also noteworthy considering SiriusXM is trying to avoid paying SoundExchange by reaching its own direct licensing deals with rightsholders (RAIN coverage here). SiriusXM recently filed a lawsuit against SoundExchange and the American Association of Independent Music (A2IM), accusing the record industry organziations of interfering with its efforts to reach those direct deals (RAIN coverage here and here).

MacDonald also recently calculated (as published yesterday in Audio4Cast here) that SoundExchange's total royalty collections were up 40% from 2010 to 2011. That growth was mainly fueled by Pandora, which paid out nearly 50% of its revenues to SoundExchange in the fiscal year that ended January 31, 2012, according to MacDonald.

"Another interesting fact: Pandora paid about as much in royalties for its FY 2012 (i.e., $136.3M) as it made in TOTAL REVENUES for its previous fiscal year, FY 2011 ($137.7M).

"With Pandora’s ever-growing listening hours and royalty payments," MacDonald continues, "SoundExchange and the labels need a healthy Pandora as much as Pandora needs a reasonable Pureplay-like rate for the next royalty term (2016-2020). This is especially true if Sirius XM continues to sign up more direct license deals, thereby bypassing SoundExchange (though Sirius XM’s recent antitrust complaint suggests that may be a tough row to hoe)."

Paul Maloney
April 12, 2012 - 11:40am

Representatives of the music industry (labels and publishers) announced yesterday the settlement of a Copyright Royalty Board proceeding for "Section 115," or "mechanical" royalties digital music services pay to reproduce a musical work (read more in The Wall Street Journal here).

It is important to note that these are not the "public performance" royalties webcasters pay SoundExchange for the use of copyright sound recordings. Also known as "Section 114" royalties, those rates will be set with a proceeding beginning in 2014 (to settle by late in 2015) for the period from 2016-2020," explains industry attorney David Oxenford in Broadcast Law Blog.

Yesterday's settlement involves digital music services's use of music outside of "non-interactive" webcasting: sales of digital downloads, ringtones, on-demand streaming, "cloud" services, and "conditional" downloads (e.g. listening to Spotify offline).

Moreover, "mechanical royalties" are "payments made to the composers of songs -- those who write the words and music of the songs -- usually represented by a publishing company," Oxenford (pictured) explains.

By the way, satellite radio provider SiriusXM, like Internet radio, also pays Section 114 royalties. They're currently in a rate-setting proceeding for the 2013-2017 term. Oxenford predicts a decision in that case by the end of this year, "which could give some preview of what webcasters can expect in their upcoming case." Read more from Oxenford in Broadcast Law Blog here.

David Oxenford is a Washington, D.C.-based partner at Davis Wright Tremaine, and an expert on broadcast and Internet radio law and royalty matters. He'll sit down for a one-on-one discussion with U.S. Copyright Office general counsel David Carson on Sunday at RAIN Summit West in Las Vegas. More information, and the registration link, is here.

Michael Schmitt
April 12, 2012 - 11:40am

TuneIn on AndroidOnline radio aggregator TuneIn has added 96 station streams from Salem Communications. "Overnight we've expanded our footprint in digital," said Salem Radio Division president Dave Santrella. "We have made it easier for our current listeners to access our programming from wherever they are and have opened up our broadcasts to new audiences." Find more here.

TuneIn just recently also added streams from CBS Radio (RAIN coverage here). Altogether the service offers more than 60,000 web radio streams.

T-Mobile is featuring TuneIn's Android app in "Music Hub," the cellular company's digital storefront app for Android devices. "This partnership has the potential to add millions of new people to our active monthly listener base," said Carl Rohling, TuneIn's VP Business Development. Find more here.

Rohling will appear at RAIN Summit West, which takes place this Sunday. He'll speak on the "Connected Dashboard" panel, along with members of Aha Radio, Cox, Livio Radio, Live365 and knowDigital. Find out more here.

Michael Schmitt
April 12, 2012 - 11:40am

WGNClear Channel's web radio platform (and increasingly, online radio aggregator) iHeartRadio will offer the Tribune's WGN station (Chicago AM-720) starting Thursday.

iHeartRadio already offers stations from Univision, Cumulus, EMF Corporate and various college stations among others. That's in addition to Clear Channel's own 800 station streams and iHeartRadio's Custom Radio service.

AllAccess has more coverage here.