AFTRA, AFL, SoundExchange react to SiriusXM's direct licensing plans

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Issue Date: 
Oct 28 2011 - 11:30am

From Issue:

Buzz surrounding SiriusXM's direct licensing efforts has heated up lately, with new statements from artist labor groups and SoundExchange.

In early August news broke that SiriusXM was seeking to license the sound recordings it plays directly from the copyright owners (record labels). Direct licenses would not only cut SoundExchange out, but copyright owners would not have the same legal obligation to share the royalty revenue with performers that's required under the "statutory" license created by the DMCA (RAIN coverage here).

SiriusXM

Thus, SiriusXM could reduce the fees they pay for music and the copyright owners, no longer obligated to share with performers, could keep more.

Two labor groups -- the American Federation of Television and Radio Artists (AFTRA) and the American Federation of Musicians (AFL) -- have come out against the move, calling it "blatantly anti-artist." SiriusXM is trying to "lower the rates for music," the groups state (here). The Recording Academy's president/CEO Neil Portnow also sent a letter to members encouraging independent labels not to directly license with SiriusXM.

AFTRA and AFL

SoundExchange also posted a message to its website. The non-profit royalty collection agency points out that Music Reports Inc. (MRI) -- the company SiriusXM is using to try to obtain direct licensing deals -- aims to obtain licenses "at the lowest possible cost." SoundExchange openly pushes in the other direction, the post states (here).

SiriusXM currently pays 7.5% of its revenues to SoundExchange for satellite radio performance royalties (it pays additional, different royalties for its Internet radio broadcasts, more here). In 2012 the rate increases to 8% of revenues. (By comparison, pureplay webcasters like Pandora pay the greater of 25% of total revenues or, in 2011, $0.00102 per listener, per song; more here). Such rates are set by the Copyright Royalty Board.

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As I am surprised that

As I am surprised that SoundExchange has not responded, I am taking the liberty to respond. The issue here is that this type of deal would never go through Soundexchange, which pays sound recording owners and artists directly for their rightful share. Instead, this type of deal would undercut what artists get for satellite radio play currently. It would be nonsensical for artists to support this deal with XM. It is also apparent that you do not understand how SX works under federal law. They only collect royalties for statury licenses with radio-type services, excluding terrestrial which as you know pays nothing for profitting of the backs of artists. Interactive licenses are negotiated by copyright owners, typically labels, and services, and do NOT come through SX.

Questions for NARAS, AFTRA/AFM, and SoundExchange

Mr. Portnoy, where was all this anguish about direct licenses with lower royalty rates when the major labels negotiated lower royalty rates with outfits like last.fm? Didn't those deals outrage you as much as the possibility that someone other than the majors could do the same thing?

For the unions, obviously, what is good for artists when the majors do it is bad for artists when somebody else uses the same law to their own advantage. The willingness of AFTRA and the AFM (not the AFL as your headline indicates) to blindly jump into bed with the majors on this should be an embarrassment to every union member. At least A2IM had the good sense to realize that each independent label had to make a judgment for themselves on the issues, based on their own business plan. The union members who actually appear on those recordings haven't been given the same choice by their unions. If anyone still wonders why these two unions appear to be a 19th century solution to a 21st century problem, they need look no further than this.

And as for SoundExchange, it's a badly kept secret that your Board of Directors has approved what is benignly called the "Manager's Amendment" that permits the organization to privately and neatly circumvent Federal law and administer those direct licenses already negotiated by the major labels who dominate your board. From your press release, it appears you are now going to be selective about using this bogus authority if SiriusXM does negotiate direct licenses. Is anyone from SoundExchange going to address this hypocrisy, or will we have to wait for the RIAA to tell you what to say?

And, I cannot help but note that your Board contains representatives from NARAS, AFTRA and AFM, all of whom know about the "Manager's Amendment," and the direct license deals struck by the majors that SoundExchange now administers in contradiction to Federal law. The sudden outrage by SoundExchange over practices that it has directly participated in for years is two-faced to the extreme. Either all direct licenses with reduced rates are bad for the people you purportedly represent, or none of them are. Which is it?

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