A Virginia federal court permitted a lawsuit against SiriusXM for alleged unpaid royalties to proceed in New York federal court. The lawsuit was filed by SoundExchange, the top digital royalty collection and distribution agency for the music industry to recover nearly $150 million in unpaid royalties.
In its lawsuit, SoundExchange claims that SiriusXM manipulated regulations to avoid paying higher royalties to artists and copyright holders. The renowned royalty agency claims that SiriusXM “accomplished this by ascribing excessive and unjustified value to the webcasting component of its bundled packages and then removing that value from the satellite radio royalty pool.” It now demands that Sirius is required to give over the unpaid royalties under the Copyright Act for the use of sound recordings on its satellite streaming platform.
This Act mandates that satellite radio services pay royalties amounting to 15.5% of their gross revenue. In contrast, royalties for streaming services are determined differently: subscription-based streaming services pay $0.0030 per performance, while non-subscription streaming services pay $0.0024 per performance.
SoundExchange adds that that SiriusXM improperly manipulated the federal regulations to create an artificially low calculation of “revenue” on which it pays creator royalties. It claims that SiriusXM “accomplished this by ascribing excessive and unjustified value to the webcasting component of its bundled packages and then removing that value from the satellite radio royalty pool.”
“It is extremely unfortunate that we must bring this action on behalf of creators against SiriusXM,” said Michael Huppe, President and CEO of SoundExchange. “In recent years we have viewed SiriusXM as a willingly lawful and compliant company that shares our desire for a robust streaming marketplace. But SiriusXM has and continues to wrongfully exploit the rules to significantly underpay the satellite royalties that it owes. It is only because our repeated efforts to resolve this dispute have failed that we are forced to litigate on behalf of artists and rights owners upon whose hard work SiriusXM has built its business.”
Court transfers the Case to New York
The Virginia court decided to move the case to New York since the allegations mainly arise out of events and decisions made in New York. Specifically, the allegations are based on conduct that occurred at Sirius’s New York headquarters, where the company developed and applied its royalty apportionment methodology. The court also took into account the convenience of both companies and potential witnesses and found that it weighs in favor of transferring the case.
Today, royalty payments from SiriusXM represent over 80% the statutory royalties that SoundExchange distributes to record labels and performers. SoundExchange now demands that it be paid the unpaid royalties, late fees and an injunction preventing Sirius XM from continuing to use inappropriate revenue calculations on its satellite radio payments going forward. 
Jacob Horowitz is a contributing editor at Compliance Chief 360°