Growing audiences for online, satellite radio push quarterly SoundExchange distributions past $100M mark

Monday, June 18, 2012 - 11:15am

SoundExchange today announced it has made $1 billion in royalty distributions to copyright owners since its inception in 2000 (read the press release here). What's more, this year SoundExchnage's quarterly payments have topped $100 million.

Today's New York Times suggests the story is good news for the organization, which "has been criticized for being slow to pay everyone who is owed royalties. At the end of 2010, the last date for which audited accounts are available, SoundExchange was holding $132 million..." for performers it couldn't reach and performances that couldn't be accounted for.

The paper also suggests SoundExchange is now challenged by "direct deals" between major content licensees like SiriusXM (which is suing SoundExchange for allegedly interfering in such deals) and Clear Channel (with its well-publicized Big Machine Records deal) and copyright owners.

Read more in The New York Times here. Also, SoundExchange's 2011 annual report is here

Forbes: Digital music industry innovation and progress "impeded by the current copyright system"

Friday, May 25, 2012 - 11:35am

Editor's note: RAIN will return on Tuesday, May 29. Have a great Memorial Day weekend!

Music royalties"To say that copyright law is complex would be an understatement," writes Forbes contributor John Villasenor. Few RAIN readers likely need to be told that. Nor should they be surprised by Villasenor's comment that the Copyright Royalty Board's "willing buyer/willing seller" model for setting Internet radio royalty rates "has not worked ideally." 

Former SoundExchange general counsel Gary Greenstein, now a copyright attorney with Wilson, Sonsini, Goodrich & Rosati, tells Forbes that "the willing buyer/willing seller standard, as it has been applied by the CRB, has resulted in rates that would likely drive many nonsubscription, Internet-based digital music services out of business."

Congress had to pass two Webcaster Settlement Acts (in 2008 and 2009, RAIN coverage here, here and here) to "temporarily grant SoundExchange, a non-government entity, with the extraordinary power to negotiate lower rates." You can read more about those negotiated rates in RAIN here. And, as Villasenor writes, even "those 'lower' rates can still be very high when measured with respect to revenue."

For example, Pandora paid nearly 70% of revenues to content acquisition costs -- which include royalties -- according to their Q1 2013 fiscal results (RAIN coverage here).

Forbes pullquote"So where does all of this leave things?" ponders Villasenor. "The short answer: in need of repair."

He argues that "some of the policy objectives enshrined in copyright laws of the United States may stifle innovation and impede new business opportunities… America’s status as a global technology leader is due in large part to disruptive advances that upend prevailing industry practices, and in doing so, often interfere with streams of revenue flowing to less innovative incumbents. Yet this is precisely the sort of progress that is impeded by the current copyright system as it applies to certain digital music services."

Rightsholders -- songwriters, recording artists, record labels -- are absolutely entitled to "be fairly paid for their work, and deserve the protections of a well-designed copyright royalty framework," writes Villasenor.

"But it’s also important not to lose sight of the public’s interest in having access, under reasonable terms, to copyrighted material." Villasenor quotes the Supreme Court from a 1975 ruling: "The immediate effect of our copyright law is to secure a fair return for an 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good."

"That [public] interest is no less valid if it happens to be served using non-traditional business models such as Internet radio," concludes Villasenor. You can find his article in Forbes here.

Do you agree with Villasenor's argument? Disagree? Let us know in the comment section!

Robertson warns radio: NAB needs to get involved, or you're screwed

Monday, May 14, 2012 - 11:35am

If the current music royalty arrangement is a "mountain" between webcasters and profitability, Michael Robertson says broadcasters have two choices: go around the mountain, or blow it up.

Robertson is founder and CEO of (which enables recording/time-shifted listening of online radio). He spoke on the panel "The Streaming Music Landscape" at RAIN Summit West in Las Vegas.

The first option, according to Robertson (left), entails radio creating an entirely new model that allows webcasters to avoid the high royalties. Fellow panelist Paul Campbell is founder/CEO of Amazing Radio in the UK, and is doing exactly this sort of thing. A terrestrial station, Amazing Radio plays only independently-owned music. In exchange for the promotion the publishers and performers receive by being aired on Amazing, they waive their royalty claims (allowing the station to perform the music for free).

Radio's second option is get far more involved in the royalty-setting process than it has to this point. "Unless the NAB gets off their ass and gets on the Copyright Office and influences those rates," Robertson exhorted, "as your business goes digital, you guys are screwed."

While Rhapsody Chief Product Officer Brendan Benzing thinks the "renaissance around consumer demand" for curated audio online will shine a brighter spotlight on untenably-high royalties webcasters pay, Robertson was less optimistic. "None of this other stuff matters unless royalties are radically changed," he said. His optimisim lies in the news of Sirius' lawsuit against SoundExchange (see background here). "That is the most important development this year for the Internet radio business. Fantastic development. You better hope Sirius wins."

After Robertson (also founder of the, which recently declared bankruptcy, more here) brought up public earnings reports from Pandora that showed the company pays fully 50% of its revenues for royalties, moderator Ted Cohen (right) asked why that's so out-of-line. Cohen, TAG Strategic Managing Partner, said, "Look at physical retail, durable goods, where 60-65% (of retail revenue) goes to supplier. Is 50% that eggregious?"

The difference, according to Robertson, is in the nature of the business involved, and radio's important role as a copyright "intermediary" between creators and the public. "Look at broadcast radio, which pays about 5% (of its earnings for musical content, in the form of composer/publisher royalties to ASCAP, BMI, and SESAC). Would any radio station have a business if they paid 50% of revenue? No." The problem, he Robertson insisted, is that lawmakers now see the purpose of copyright not to benefit the public (as many interpret the Constitution to mandate), but rather to benefit copyright owners. And what the rate structure fails to take into account is the importance of "distributors" of copyright -- those entities like webcasters and radio -- that are necessary for the public to reap the benefit of copyright by broadcasting and streaming that content.

On the topic of distribution, Robertson advised broadcasters to "pay attention to mobile. That's where the majority of your listening will come from in the future." He said, "Get your signal everywhere, don't do exclusive deals. Any digital guy that comes to you (to make a deal), as long as it doesn't cost you any money, you should do it."

That is, of course, once the royalty matter is solved. The Internet radio business "is a rocket," Robertson said. Right now, "unfortunately, it's a North Korean rocket."

See the entire video of this panel, and all our RAIN Summit West content, at RTTNews here.

SoundExchange seeks dismissal of SiriusXM lawsuit

Tuesday, May 8, 2012 - 11:35am

SoundExchangeSoundExchange is seeking dismissal of the lawsuit brought against it and A2IM (American Association of Independent Music) by SiriusXM in March. SiriusXM contends that the music industry organizations interferred with its attempts to secure direct licenses with rightsholders.

In SoundExchange's court documents filed yesterday, the royalty collection agency accuses SiriusXM of trying to use the courts to influence royalty negotiations. SoundExchange also argues that SiriusXM's failure to obtain direct licenses doesn't imply a "conspiracy."

You can find previous RAIN coverage of the SiriusXM lawsuit here, here and here.

Seeking Alpha has more coverage on SoundExchange's dismissal request here.

SoundExchange hires new VP of Communications

Monday, April 30, 2012 - 11:40am

SoundExchangeSoundExchange has appointed Marie Knowles as vice president of communications. Knowles has more than a decade of communications experience. She's worked with clients like Rosetta Stone, Iridium, Blackboard, New Media Strategies and Ruckus Entertainment Network.

You can find SoundExchange's press release here.

SoundExchange: SiriusXM, Pandora royalties constitute "substantially" less than 90% of total revenues

Wednesday, April 18, 2012 - 12:45pm

SoundExchangeLast week we wrote about new calculations from Live365 general counsel Angus MacDonald, which found that 90% of SoundExchange's 2011 revenue came from just SiriusXM and Pandora (RAIN coverage here).

Now SoundExchange refutes the claim, though the collection agency says they "are not able to publicly disclose the payments to SoundExchange from specific digital music services." SoundExchange argues that royalty payments from SiriusXM and Pandora made up "substantially below" 90% of their revenues. has more coverage here.

MacDonald calculated that Pandora's royalty payments alone made up 36.66% of SoundExchange's revenues. The webcaster paid "about as much in royalties for its FY 2012... as it made in TOTAL REVENUES for its previous fiscal year, FY 2011," wrote MacDonald.

Pandora paid 49.7% of its FY 2012 revenues to SoundExchange, according to its 10-K submitted to the SEC.

SiriusXM is currently suing SoundExchange and A2IM, accusing the record industry organizations of interfering with its efforts to reach direct deals with rightsholders (RAIN coverage here and here).

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