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Record companies seek 10 percent increase in royalties

The end of a royalty agreement between the country's two leading satellite radio operators and a music industry organization may have a serious effect on how much money the companies need to dish out for music. At the end of the year, XM's and Sirius' deal with SoundExchange -- the group responsible for collecting royalty fees for artists and record labels -- is set to expire and along with it the terms of how much the satellite companies owe to broadcast certain music.

A move sure to have implications on the satellite radio industry, SoundExchange - representing record companies like Universal Music Group, Warner Music Group, Vivendi and Sony BMG - is asking for a 10 percent increased cut of Sirius' and XM's revenues next year with the rate jumping to 23 percent by 2012.

According to press reports, both XM and Sirius currently pay somewhere around seven percent of their revenues to SoundExchange. And while the two rival companies are normally battling for more subscribers, on this issue they have come together to offer the music-royalties group a reported one percent slice of the pie. Company execs have called the demands "a major handicap."

But SoundExchange said it was the deal's current structure that allowed both satellite operators to get off the ground and a renegotiated rate for the group's popular programming is more than fair. The organization reported collecting $43 million in royalties from XM and Sirius during 2005 with an expected $55 to $60 million more this year.

The Library of Congress' Copyright Royalty Board is anticipated to make a final decision on the matter in the future.

www.SkyReport.com - used with permission
 

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Old Guys Rule!
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This could prove a huge burden on XM and Sirius, which have yet to show a profit. They'd have no choice but to raise rates, and the public might not stand for that.
 

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Cholly said:
This could prove a huge burden on XM and Sirius, which have yet to show a profit. They'd have no choice but to raise rates, and the public might not stand for that.
Fascinating. You already know that they're operating at a loss, but you think that an increase in one of their expenses will automatically become higher subscriber rates.

Prices are set to maximize profit or minimize loss. Sometimes a business will run at a loss as it builds market share; in such cases, the prices are set to maximize long-term profit by building the customer base. Prices are based much more on what consumers are willing to pay than on any particular expense. And in the case of satellite service providers, their fixed costs are a much higher percentage of total expenses than for most other businesses. That means that the incremental cost of adding a new subscriber is very small, even if an extra 2-3% of the revenue goes to the music folks.

Me, I'm encouraged that an independent arbiter will decide the matter. It guarantees a price that's pretty fair for both sides without the sat-company-vs.-programming-provider smackdowns we've seen too much of over the years.
 

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What I’m about to say really has nothing to do with this specific topic, but more along the lines general topic of the media hating satellite radio.

I find this all very ironic. Satellite radio, an industry that these alphabet idiot originations all thought would fail and wrote off 5 years ago. Now that the industry is successful they have to attack and smack down satellite radio because it has taken off and it is a threat. With all of the hurtles these two companies have faced I’m really surprised they’re still as much like they are today as they were in 2002.

Why are these two companies that were christened for failure creating such a controversy. To my knowledge all of the BS that Sirius and XM are going though has never happened to the first SDARS provider on the planet, WorldSpace. Why do XM and Sirius get the shaft and WorldSpace doesn’t. Oh yeah that right Worldspace doesn’t have to deal with the FCC, RIAA and NAB.
 
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