Sirius XM Strikes $150 Million Settlement With SoundExchange.

Story by Inside Radio

Sirius XM Radio has agreed to make a one-time $150 million payment to settle a lawsuit brought by SoundExchange nearly five years ago, alleging the satellite radio service underpaid royalties under its license covering the Jan. 1, 2007 through Dec. 31, 2012 period. The agreement was announced in a filing with the Securities and Exchange Commission. It revealed the deal also resolves “all outstanding claims” including all of SoundExchange’s ongoing audits of Sirius XM’s web radio service.

Most significantly the settlement closes the books on a suit brought by SoundExchange in Aug. 2013 in U.S. District Court in Washington. In the complaint, the non-profit rights management organization alleged Sirius XM underpaid royalties by improperly reducing its gross revenue subject to royalties by deducting revenue attributed to music recorded prior to Feb. 1972. SoundExchange also alleged that Sirius XM’s “Premier” package revenue wasn’t “separately charged” as required by Copyright Royalty Board regulations. Sound Exchange, which collects and distributes royalties for artists and the sound recording copyright owners, had sought between $50,000 and $100,000 in addition to interest, late fees, and attorney costs from the company.

Sirius XM has insisted through the years that it properly applied the gross revenue exclusions allowed by the Copyright Royalty Board (CRB). In 2014, a federal court agreed that the CRB’s guidelines were ambiguous and while it didn’t go along with the company’s request to dismiss the complaint, it did agree to put the suit on hold in order to give the CRB an opportunity to interpret its regulations. It took three years, but last September the CRB sided with Sirius XM and said the satellite radio service had correctly interpreted the revenue exclusions.

The CRB’s decision bounced the standoff back to federal court where last December SoundExchange added to its legal filing, alleging Sirius XM excluded late fees received from subscribers from the calculation of gross revenues. It also contended that the company systematically underpaid royalties for its internet radio service.

But Sirius XM said it only excluded songs from its royalty calculations that it wasn’t able to identify. How much that meant it was due to pay wasn’t entirely clear however. The company told shareholders in a recent regulatory filing that it suspected that it underpaid for that streaming music use by more than 10% of what it believed SoundExchange was owed. The company had said an exact total wouldn’t be known until an audit of its internet radio service had been completed. The just-announced $150 million settlement not only means the legal costs will stop piling up, but the company no longer will have an uncertainty hanging over it.

The company had no comment on the settlement. But in recent months it has been pushing back against the idea that it is resisting paying artists for pre-72 recordings. CEO Jim Meyer wrote in a recent op-end that the company has already paid more than $235 million for that music, while at the same time it has also opted to settle lawsuits tied to state copyright law violations.

Music use is also getting more expensive for Sirius XM. The Copyright Royalty Board hiked the rate covering the performance of sound recordings delivered over satellite by 41% for the period covering Jan. 1, 2018 through Dec. 31, 2022. That meant Sirius XM will pay a royalty of 15.5% of gross revenues, up from 11.0% under the previous agreement, according to a filing with the SEC last December. While that’s a big jump, SoundExchange had been seeking an even bigger amount.