Satellite radio provider Sirius XM (SIRI) is being accused of playing music without paying for it. This week, SoundExchange, the nonprofit that collects digital performance royalties and distributes them to artists, sued Sirius in federal court, demanding $50 million to $100 million in back payments on songs played across its stations between 2007 and 2012. The most jarring allegation is that Sirius—home to hundreds of 24-hour radio channels, some with titles like ’60s on 6 and Siriusly Sinatra—hasn’t paid for any song recorded before 1972.
“This has been an ongoing battle with Sirius for several years,” says Michael DeSanctis, a copyright lawyer representing SoundExchange in the lawsuit. “Artists are being severely underpaid. We hope to determine the exact amount that Sirius owes during the discovery process, but it may be as much as $100 million. This is serious. Pardon the pun.”
But the lawsuit isn’t just about nonpayment. It’s a case that lays bare the comically convoluted nature of U.S. copyright law. For those of you not nerdy enough to know the ins and outs of music royalties, here’s a quick primer:
There are two types of rights associated with a recorded song: the copyright held by the composer, and a second copyright of the actual recorded performance usually held by the record label. The Copyright Royalty Board (CRB) determines the royalty rates, which vary for all the different ways people listen to music, whether via Spotify, a jukebox with an Internet connection, or your typical AM/FM station. For example: If you hear a song in your car that’s broadcast from a traditional radio station, know that those royalties go to songwriters exclusively, but not performers. Got it?
Streaming services like Pandora (P) and Spotify pay both songwriters and performers. So does Sirius XM. (Why they have to do this and regular radio doesn’t is a long and legally complicated story that basically boils down to: because the U.S. government says so.) But the royalty rates they pay are different, because Pandora and Spotify can precisely measure how many subscribers listen to a specific song. (The CRB makes the companies pay a fraction of a cent every time a song is played.) Sirius, on the other hand, can’t measure its listeners, so the CRB makes it pay a portion of its gross revenue. Currently, Sirius pays about 8 percent.
Here’s where things get even more complicated. Sound recordings weren’t given federal copyright protection until 1972, so most recordings made before then aren’t covered by the law. When Sirius reported its revenue, it would estimate the percentage of songs it played that were pre-1972 and then reduce its SoundExchange payments accordingly. (In January the CRB officially declared that pre-1972 works could definitely be excluded from payments. But between 2007 and 2012, the years covered in the court case, SoundExchange claims no explicit exception had been made.) Sirius reps declined to comment for this article.
It’s only going to get worse as people find newer and cheaper ways to listen to music. “When a revenue stream becomes more and more important, you’ll see more and more litigation over it,” says DeSanctis. Pandora, for its part, has already started lobbying Congress to get involved. In June it bought a radio station in Rapid City, S.D., arguing that the acquisition entitled it to better royalty rates.
Music services aren’t the only ones upset over payments. Artists have started to speak out about the laughably small royalty checks they receive. In June, Cracker’s David Lowery wrote an irate blog post revealing that Pandora paid his band only $42 in songwriter royalties for 1.15 million plays of its 1994 song Low. A few weeks later, Thom Yorke removed some of his music from Spotify, complaining that “new artists get paid f--- all with this model. It’s an equation that doesn’t work.”
“Equation” may be putting it lightly. These days the chalkboard from Good Will Hunting may be more like it.