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Low royalty rates are something that concerns every artist, label, songwriter and publisher. The good news is that they’re gradually rising, and since there are more paying subscribers to streaming services every year, the revenue pie is also getting larger. This may take an even better turn if the proposed new rate increase that SoundExchange wants from SiriusXM comes to pass.
To be clear, SoundExchange is a government body that collects revenue for artists from non-interactive (meaning they play like a radio) services like Pandora, satellite radio, cable TV’s Music Choice, and Muzak background music that you hear in retail stores everywhere. Every 5 years the Copyright Royalty Board (CRB) sets a new rate that these platforms must pay content owners and creators for streams on their ad-supported tiers.
Last year, the CRB increased the royalty rate for Pandora a slight bit from $.0014 per stream on its free ad-supported tier, to $.0017. SoundExchange asked for $.0025, but part of that may have been a strategy of bidding high to get a better rate in the end.
For SiriusXM, SoundExchange has proposed a rate starting in 2018 that is the greater of either 23% of the platform’s total revenue or a per subscriber rate starting at $ 2.48 per subscriber per month in 2018, with small annual increases until the agreement ends in 2022. Sirius XM currently pays just 10.5% of its “Gross Revenues” 2016 and 11% in 2017.
For Music Choice and Muzak, SoundExchange has proposed a per subscriber per month rate starting at $ 0.019 per subscriber per month with annual increases. The current rate for Music Choice’s and Muzak’s cable/satellite TV music services is 8.5% of Gross Revenues in both 2016 and 2017.
As you can see, SoundExchange likes to reach for the stars when it comes to proposed rates. Even though these seem reasonable for everyone involved in the music business, effectively doubling a rate does put any distributor in an immediate financial hole that some might find difficult to climb out of. That’s why we can expect higher royalty rates from SiriusXM, Music and Music Choice once the CRB rules, but they’ll probably not be as high as SoundExchange has proposed.