The royalties that Sirius XM will pay to SoundExchange for the next 5 years will be decided by the Copyright Royalty Board ("CRB") in December. To summarize the hearings that have been held over the last year, the CRB held an oral argument last week, where Sirius XM and SoundExchange presented their arguments as to what those royalties should be. Sirius argued that the rates should be decreased, while SoundExchange contended that the rates should go up significantly from the 8% of revenue that the service now pays (see our summary of the current Sirius XM rates here). How can these parties have such different perspectives on the value of music, and what did this argument say about the application of the 801(b) standard that applies to Sirius? This standard is the standard that webcasters are seeking to apply to Internet Radio services through the Internet Radio Fairness Act which we wrote about here. If the IRFA is adopted, it would apply when the CRB next reviews webcasting rates in a case that will be decided by the end of 2015.
Sirius XM and cable music provider Music Choice, which was also part of the proceeding, are both governed by the 801(b) standard rather than the “willing buyer, willing seller” standard that applies to Internet Radio. The oral argument made clear that the adoption of the 801(b) standard is not in and of itself a panacea for the concerns about the royalties that have been set by the Copyright Royalty Board. Last week’s argument focused on the value of music in a marketplace – essentially the “willing buyer, willing seller” question. While other 801(b) factors were discussed, they were seemingly passed over quickly, with most of the focus being on the questions of the marketplace value of the music.