Sirius XM Passing Music Royalty Rates On To Subscribers, Raising Lots Of Questions

from the disparity dept

Beginning at the end of July, Sirius XM satellite radio subscribers will see an extra charge of about $2 per month on their bill, as the company will begin passing along the music royalty rates it must pay to subscribers. We’ve written a lot about music royalties and licenses, particularly about how they serve to stifle the very innovation the music industry needs to survive, in favor of upfront demands for cash — money which seems to have a hard time making its way to artists. This news from Sirius XM not only is likely to raise the hackles of its subscribers, but also raises some questions about the royalty system, and how it affects consumers.

First, the royalty rate for Sirius XM was set by the CRB at 6.5% of gross revenues for 2009, increasing by half a percent per year over the following three years. So why, then, is Sirius XM charging a $1.98 fee — or 15.2% — on its $12.95 monthly subscription fee? That seems like much more than “passing along” the royalty rate. As part of the governmental approval for the merger of Sirius and XM, certain conditions were placed on the company, including a three-year price freeze. The company has gotten around this before by separating out services, like online listening, that used to be included in the general subscription fee, then requiring an additional charge for them. Now it looks to be getting a boost by “recovering” a significantly higher percentage of its subscription fees than it must pay out in royalties. The FCC’s merger conditions allow the company to pass the royalty fee on to consumers — but why would they let the company pass on a fee almost three times as high as the actual royalty rate? Mobile phone companies have used similar “fees” to pad their revenues for some time, and the FCC apparently doesn’t mind that, either.

Second, and perhaps more importantly, this situation highlights the disparity in how the music royalty rates are applied. Terrestrial radio broadcasters, unlike satellite broadcasters, don’t have to pay musicians (or, rather, their labels) royalties. Satellite radio was presumably, an easier target for the likes of the RIAA, given its relative lack of lobbying strength, so the industry cartel defined it as an “interactive” service — industry-speak for “pay us more money.” It’s hard to see how satellite radio is really any different than terrestrial radio, except for a different business model, albeit one with the same end, so it’s also hard to understand why the two should be treated differently from a royalty perspective. The RIAA and its cronies have been working to change this — by trying to force terrestrial broadcasters to pay up as well. They call radio “a kind of piracy”, again ignoring the fact that radio, whether it’s satellite or terrestrial, promotes their products. The National Association of Broadcasters, which represents traditional broadcasters, likely doesn’t really mind the fact that Sirius XM has to pay royalties, given its well-documented disdain for the company. But by standing idly by while Sirius XM gets hit with the royalty mandate, it weakens its own argument against its members having to pay royalties. The equitable solution here isn’t really to force terrestrial broadcasters to pay up, to level the proverbial playing field. It’s to eliminate the royalties that are hamstringing new services and promoting music. Sooner or later, the industry will figure this out — but at this point, it looks like that realization will come only after it’s run itself into the ground.

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Companies: sirius xm

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Comments on “Sirius XM Passing Music Royalty Rates On To Subscribers, Raising Lots Of Questions”

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57 Comments
zellamayzao says:

up up up and up

My friends and I who have satellite radio have noticed our prices going up and services going down. Like the articled states we have to pay to listen to it on the internet now when it was included. I like the fact I voluntarily pay a subscription fee to listen to almost commercial free radio with a better music library than the top 40 bullcrap played on regular radio, but I’m not a big fan of them “passing along” their rate increase to the customers at 3 times the price they have to pay.

If this keeps up I will probably cancel my sirius subscription seeing as how pretty much anything I want I can download for free using any number of bittorrent sites and just throw it on the ol ipod.

Anonymous Coward says:

Re: Re:

If you’re like me, you’ll probably cancel after you can’t find your XM reciever after a few moves across country.

But let’s face it: when moving, XM is a low priority. Eventually, you may find a XM reciever and be surprised that it still works and gets all the channels, even though you canceled it a while ago.

A few threads about this phenomenon exist on the interwebs and it seems XM only sends the “deauthorize packet” during the first few weeks, at a point they eventually stop. So long as it’s securely packed in a box, it seems it can’t get the deauth packet. (Cardboard does that)

So, point is, it looks like I’ve been blessed with Free XM for a few years now, and occasionally whenever I move, I tune in for a few moments to see if it works, and more importantly, if things changed and I want to set it up, and resume actually paying for service.

Usually this exercise lasts about an hour, which ultimately leads to me packing it back up in another box (with bubblewrap), a facepalm, and remembering with crystal digital clarity why I always was happy to arrive where I needed to be when I had brought 28 CDs during cross country drives.

If your’re like me, you probably clocked in a few hundred hours of actual listening time between the two receivers you had, and remain baffled that they think the service is worth paying for. If one day the service stopped working, I still wouldn’t pay for it.

It’s great American Technology, but the content and playlists, quite honestly, fully and completely, unequivocally sucks.

I suppose the point is, that I still won’t use it if it was free.

Netflix has a different business model, and keeps tempting me, via the occasional emails begging me to come back, and each time, I sirius, I meant, seriously think about it.

Anyways, we’re about to tee up. Gotta run.

Anonymous Coward says:

After being a subscriber for many years to Sirius after the merger that took away a couple of my favorite stations (Punk and Boombox) with no substitute so they could add more 24/7 one artist only stations plus they started charging for online listening it was too much. I’m back to MP3s now. I miss listening to Stern in the morning but not for what they charge now.

vastrightwing (profile) says:

Waiting to subscribe until...

I’ve been lurking around waiting to buy satellite radio until the price goes down. This means, I’ll probably never subscribe. Once I passively subscribed via Dish Network. But then I lowered my service tier & I use Pandora instead.

Sirius/XM is not only going to loose subscribers by overcharging (again), but potential new subs will not pay the too high cost.

Free over the air radio isn’t compelling to me either. HD radio is a gimmick.

Mileage (profile) says:

So have I paid the royalty?

If the company is claiming to directly be passing on the costs of the royalty payments to the consumer then does logic not dictate that the consumer is paying for the royalty as well as the service? And if that’s the case could we then just record music from the radio and use it as we please, because we’ve already paid for the royalty to listen to the music in the first place?

I’m sure this idea is too simple for an RIAA lawyer to understand, but I thought it was one worth pointing out.

Ziggy says:

Exactly Ian, exactly

I’ve been a long-time XM subscriber – I first signed up in early 2004 and have had an ongoing subscription ever since. I’ve paid for 2 radios for a couple of years now. I generally like XM, and have ‘sold’ about a dozen friends on it over the years.

But this is getting ridiculous. Sound quality is up and down, but generally it’s gotten worse as they’ve packed more channels in. It really depends on the channel though – different channels get different levels of compression depending on the popularity.

But these price increases. It was stable and a “good value” for several years but in the past year they just keep jacking up those rates. They never should have been allowed to merge with Sirius – as soon as they did, the prices started increasing and previously free features (internet streaming) now have a monthly fee. 4 years ago there weren’t other options for mobile streaming audio. Today, anyone with an iPhone and Pandora has an anti-XM solution already – with no additional costs other than the monthly data charge they’re already paying.

I’m pretty much done with XM if they hit me with another rate increase. It’s marginal as it is now. Everyone is looking at how to save a few bucks these days. XM doesn’t understand that it’s going to be one of the first things that customers chop when looking to trim a budget. It’s low-hanging-fruit. It’s a luxury that many people can do without and can easily get rid of and replace with other music solutions. And that’s exactly what they’re going to do as these rates continue to increase.

XM’s costs are fixed. The birds are in the air, and it costs the same to them whether they’re broadcasting to 1 person or 100,000,000. They need to lower their rates and aggressively push for new customers, with new and exciting hardware. That’s the only way they’re going to be profitable. Squeezing their existing customers will be a failure.

Steve says:

Re: Exactly Ian, exactly

It amazes me how many people complain about a few dollars. I have friends that complain about this but but have no problems buying 4-5 beers a couple times a week. Really for the content and no commercials, I will never go back to terr. radio. I guess everyone spends their entertainment where they see fit. I am shocked by the uproar over a couple of bucks.

interval says:

Sirus/XM

Lets not blame Sirius/XM too much for this. Personally I get an enormous amount of value out of being able to listen to one station (channel) while driving from coast to coast and if they add some extra cost to my subscription I’ll pay it. The real issue here is how anachronistic and grabby the labels are. They really need to go. I don’t get ANY value from record labels that I’m aware of.

Tom The Toe says:

Sirus/XM

I also paid quarterly for my XM subscription. I got a notice 2 months ago about the price increase. I had been paying for 2 radios and was very happy until the merger. I lost two of my favorite stations with no replacement, lost the online streaming, rates went up. I voted with my wallet and cut off the service. I’ll just listen to my mp3 player. You don’t keep customers by increasing prices and decreasing service.

CharlieM (profile) says:

Just got off the phone with (XM) –

After asking 4 TIMES point blank if my bill was going to change (they kept saying NO), I said “Alright, i guess the information was incorrect, I heard it would be going up $1.98… well, thank you and goodbye”.

Then I get “Oh… Yes, the $1.98, thats not a fee increase, its from the Music –Blah blah blah–, so its not technically a price increase.”

ME: “So, can I not pay it and continue to listen to my service?”, “Nope”, “Ok, thats a price increase, now cancel it”

:: Connected to Supervisor ::

where I am told, there has been no decision yet to charge the $1.98 and if we do decide, you will be informed.

Left it like that and decided to not cancel my subscription (maybe they will rethink their policy on this matter).

Magnum PC (profile) says:

Cancelled Sirius 5 mos ago...

Couldn’t be happier. The music they play is a short rotation of songs that repeats over and over and over. With my mp3 player, I listen to what I want and when I want. And the quality is much better. The only show on Sirius I miss is the Alex Bennett Show. I’ll live.

BTW, I also don’t watch cable TV anymore. All the TV is online now. On the odd occasions when I actually watch a commercial on a friend’s TV, I actually am surprised most of the time because I am not connected to the Madison Ave. zeitgeist anymore.

CharlieM (profile) says:

I don’t understand why, from a business perspective (short sighted benefit vs. long term prosperity aside), people are being so critical of the labels/music industry. They are money hungry business men, and the fact that subscribers are ‘going’ to be paying two times the amount supposedly in royalties, then I don’t see why i should treat them (XM) any differently.

vastrightwing (profile) says:

Idea

before you cancel Sirius/XM, connect the output of your radio to your computer’s sound card. Capture the audio of as many channels as you want to record. Go to sleep, wake up the next day, stop the recording and switch to a new channel. Do this for a few days and presto, you’ll have most of what you were getting to “remember” forever.

When you go in the car, simply playback an mp3 and you’ll have hours of music to enjoy with no subscription.

Glenn says:

I long ago passed the point where I was willing to pay anything for any music listening “pleasure”. The RIAA and its cronies are the real pirates with regard to the music industry. Music is no longer “art”, but merely a front for one form of organized crime. Frankly, if you’re stupid enough to subscribe to Sirius XM, then you deserve to have to pay whatever they want; you’ll get no sympathy from me.

Greg S. says:

early adopter

I dropped XM in 2008. I signed up with XM early-on, I was in the first 500k users. First nail in the coffin was the portable receiver that didn’t work. Next came the increasing compression making it sound worse. Then came commercials in the channels I liked the most. And then came the spam commercials (ads for the same stuff as in email spam; viagra, debt services, get rich quick at home in your spare time). And the final blow was another increase in compression that made it painful to listen to. I went back to an MP3 player in the car – much better sound, no ads, no monthly fees.

Steve says:

"passing along" the royalty rate or not

XM says on their site “100% of the U.S. Music Royalty Fee will be used to offset payments from SIRIUS and XM to the music industry.”

How does that reconcile with what you have written above?

“First, the royalty rate for Sirius XM was set by the CRB at 6.5% of gross revenues for 2009, increasing by half a percent per year over the following three years. So why, then, is Sirius XM charging a $1.98 fee — or 15.2% — on its $12.95 monthly subscription fee? That seems like much more than “passing along” the royalty rate.”

Chuck Stapleton says:

Greedy Bastards

The FCC’s decision to allow the 2 companies to merge was a poor one and one that certainly would not benefit the consumer. It has not even been a year and these concerns are coming true.

According to the FCC’s guidelines, there were certain conditions that were to be followed to allow the merger. One of them being that the pricing would not be raised for 36 months.

Well as a subscriber to the Sirius I can tell you that they have used to loophole to skirt the provisions and effectively raised the prices, not once, but TWICE!

In the first instance, the did not raise the prices on the primary units, but raised the prices $2 month for each additional unit. Today I get another notice from Sirius that they are now adding a “Royalty Fee” charge of $1.98 per month on primary units and .97 for additional units.
Call it whatever you want, this is effectively 2 price increases in less than 6 months and is unacceptable.

I would like Congress to look into this matter and propose legislation to prevent not only Sirius XM, but all companies from engaging in this deceptive behavior.

Everywhere you look today, companies are engaging in deceptive practices and by raising prices and disguising them as additional fees and charges. This is standard practice on just about every rental car with concession recovery fees, battery fees, tire fees, license fees, etc. They are not the only ones, this practice is very common with hotels (resort fees) and now airlines are jumping into the fray.
This has to stop. The price should be the price. The only thing that should be allowed to be added is any taxes and fees required by law.

kingtj (profile) says:

I didn't go for this either...

I just bought a new car back in March, that came with a free 3 month trial of XM/Sirius. About a month before the trial ran out, they started calling my cellphone at all hours of the day and night, trying to get me to subscribe. The telemarketing campaign was SO annoying, I vowed not to subscribe based simply on that! (I have a home phone number, so why they kept calling my CELL instead, I don’t know?)

When I let the trial expire, they started mailing me postcards offering special pricing for “coming back”, and waiving the $14.95 “re-activation fee”. (That’s kind of insulting in itself. I have to PAY to re-activate, on service I never, ever paid for in the first place?!)

Well, *finally*, their latest “please come back” type offer was good enough, I actually considered it. Basically, an entire year for about $78, and they were even willing to bill me, vs. keeping a credit card on file. For under $80, I was ready to go for it (despite the sound quality being pretty bad for their music stations). But THEN when I was in the process of ordering, they mentioned the extra $12 or so for these new “royalties” and said there was absolutely no way to waive that charge. (Since it says NOTHING about that on the card they mailed me, and their quoted price says it’s good through August 28th. — I fail to see how they can legally refuse to honor that?!) So again, I told them to forget it.

Michael says:

I cancelled

After 5 years with XM Radio, and as many as 5 receivers activated at once, I quit.

I was not unhappy with the service or the number of available stations. I am simply tired of being misled. I looked forward to the Ala Carte menu after the merger, which hasn’t really happened. I enjoyed, for years, listening online which was included in my price originally…not anymore. I’m not a huge NASCAR fan but that was an included channel when I first signed up. Now I have to buy an extra package with other channels I don’t want to to get the one that I do. Who cares about what Howard Stern or Oprah have to say?

It is not just XM, it is everywhere. Look at cell phone providers. $49.99/mo advertised doesn’t say anything about the $10-$20 in other fees. Guess what, I haven’t had a personal cell phone in about 2 years. I don’t miss it at all. Cable companies quote you a fixed price that doesn’t tell the whole story either. Heck, the almost force you to buy packages of services these days. Hmmm…guess who I am breaking up with next?

For me today was about saying I’ve had enough. I now choose to hang onto my money.

Sal says:

RIAA Strikes Again!

I’m done. The RIAA goes after yet another outlet with their insatiable greed. Who are these people anyway? They certainly have little concern for the arts. They killed the CD market and just about every other outlet. They may have, this time finally cut open the golden goose. Soon there will be no more pockets to pick. Maybe they can get their money back from all the Legislators they bought.

Non-Conformer says:

My shiny new XM Bill in the mail....

Received my annual XM bill in the mail today. I paid about $144 last year for a years’ worth of “service”. This year the bill was $174, an increase of about 20%. 20%, are you kidding me? If I $22 for “Royalty Fees”, $8 for a state tax (wtf?, it’s not a tangible product that retains a value or is a physically consumable product or even a depreciating asset, why am I paying their taxes?) and $2 for them to “invoice” me. I’m not cool with that at all.

I called them, told them I was going to pay what I payed last year and that was it. They didn’t even blink. Charged me the same amount. I told them that if prices, like the economy and peoples’ incomes didn’t come DOWN next year, I would become good friends with my Hi-def radio and MP3 player and they could pack sand.

I hope others have the same results I did.

CJNew says:

Sirius Royalty Charge

Makes perfect sense to me to raise the rates on everything during a bad economy. Let’s see my Utilities went up 24%, my Garbage and Sewer went up 25%, heck, everything went up and now I am supposed to go out, voluntarily mind you, and support the economy by buying a new car or shopping for new furniture. You get my point I am sure, so let’s just keep bending over and taking it in the a$$ while the chosen few corporate CEO’s and the corrupt people of the world get rich while the rest of us struggle to make ends meet.

It’s called Capitalism people and we have to like that right?

What a wonderful opportunity this country offers, and one more thing, let’s support technology so it can phase out more jobs. Makes sense to me……..

vtxhokie (profile) says:

It is like we are buying stock in Sirius/XM for 1.98 a month but we get nothing out of it. Why don’t Sirius just say we are raising the rates instead of trying to come off like it is their fault. I am sure they knew this was coming and I am sure they planned this not only as a way to pay off their royalty fees but a also a way to increase rates. They could charge each customer just 10 cents a year and still have enough to pay their royalty fees.

Frank K. says:

Scam through and through

I went to sign up for one of their deals for my new car and got hit with what amounted to a 20% surcharge on the deal, i.e. their royalty fee. Regardless of the legal definition this is ‘bait and switch’ at its best. There has got to be something illegal about advertising an $80 or $20 deal and not disclosing a 20% upcharge anywhere in the flyer. In the fine print it just says additional fees. I actually like Sirius but not when their trying to scam me. No Sirius, forced me to check out all the am/fm stations in my area. Lo and behold there were nuggets that I never knew about and covered the music genre’s I cared about. Goodbye Sirius!

There ought to be a way to pressure the car companies to allow the unconfiguring of Sirius from their onscreen menus. If you don’t subscribe it just clutters up the screen and its just software and easy for the manufacturer’s to do!

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