Sirius XM must raise prices to pay music royalties

Satellite radio provider Sirius XM is preparing to raise prices.

The Copyright Royalty Board has raised music royalty fees and Sirius will pass those costs on to customers starting next month.

In a letter to subscribers, Sirius CEO Joe Zarella said "Beginning on July 29, 2009, a 'U.S. Music Royalty Fee' of $1.98 per month for primary subscriptions and $.97 per month for multi-receiver subscriptions will be effective" the next time they renew their subscription.

Royalty rates have risen steadily since 2007 when the CRB established performance royalty rates for satellite radio. The rate jumped from 6 percent last year to 6.5 percent this year and will go up every year until 2012, when the rate will top out at 8 percent.

Sirius and XM promised the Federal Communications Commission they would not raise rates as a condition of the companies' merger, but the FCC did allow them to issue rate hikes to account for any increase in royalty costs.

In an FAQ posted on Sirius' site, the company states plainly that satellite radio providers are being charged fees that traditional radio stations aren't required to pay.

"Unlike terrestrial radio, both Sirius and XM are required to pay copyright music royalties to recording artists, musicians, and recording companies who hold copyrights in sound recordings," the company said.

[hankthedwarf]

That RIAA sure knows how to drive paying customers towards piracy. They've perfected the craft over the past 10 years. Well done, gentlemen!

[md20877]

What I don't understand is that the FCC terms are clear "allow them to issue rate hikes to account for any increase in royalty costs" (since SXM's application for merger in 2007). Note that it says "increase" in royalty costs - not pass on "the" royalty cost. The increase in royalty costs has only been a few cents per subscription. This years increase was less than ten cents for a standard subscription. Even with the loosest possible reading of the FCC ruling, 100% of the current 6.5 percent rate would only be 85 cents! Less than half of the charge soon to tacked on to customer's bills. Clearly SXM has tacked on more than the royalty increases here, and whatever that amount is plainly "a rate increase" which was prohibited by the terms of the merger.

It is not hard to see that SXM needs to increase their revenue. This is a very questionable means of getting it and the subscribers deserve better accounting from them.

[DouglasBubbletrousers]

Goodbye Sirius. This is the 2nd price increase in the last few months. I have 2 subs, they raised the price of the 2nd sub by $2.99 a month, plus dropped the free online streaming. After this increase Im done. They claimed the merger would be good for customers, but I guess not. Times are tough and this is an expense Im no longer going to pay.

[ewsachse]

This rate increase has nothing to do with the merger. Did you even read the article or did you just scan the headline?

[Sandtigrr]

I agree. I'm done. Whether it's directly a result of Sirius or not I'm done with spending all this extra cash on a luxury that goes up almost as fast as cable does. I was considering dropping them after 1) Bubba went to rebroadcasted shows except for friday mornings, 2) the price increase for online streaming (takeaway from what we got in our subscription), and now the third strike.

[ibeetle]

@ewsachse

It has everything to do with the merger. Sirius and XM were separate companies for 6 years before the merger. In the last 6 years there was only one rate increase by each company, and no talk of royalty rates. Now in one year there has been nothing but rate increase after rate increase, or charging for services that used to come with ones service, and now on top of all that a illegal royalty charge that could be fought in the courts just like terrestrial radio did; and to throw even more mud in the faces of its subscribers SiriusXM is going to charge 75 times more than the actual royalty rate. Which is flat out against the rules of the merger as laid out by the FCC. If there was a way to complain to the FCC I would.

[alaris3k]

Once the RIAA thieves are out of the loop, I'd be happy to pay for music. Til then, hell no.

[monkeyfun14]

RIAA has nothing to do with the Copyright Royalty Board.

[markdoiron]

The RIAA and the Copyright Royalty Board are two different organizations--the RIAA is an industry organization and the CRB is a government entity. But, the RIAA makes its case before the CRB for royalty rates on music. It's silly to say that the RIAA has "nothing to do with the Copyright Royalty Board."

But, for those blaming the RIAA for this increase: Recently the RIAA was defending in front of the CRB, against other music industry interest groups, the lowering of royalty rates on digital content. Now, I'm not RIAA fan--won't even listen to RIAA artists anymore--but maybe it shouldn't be a knee-jerk reaction to blame the RIAA.

--mark d.

[DouglasBubbletrousers]

@ewsachse

Yes I read the article. As Sandtigrr said, whether its a direct increase or a fee imposed to cover RIAA fees its the 2nd time they have raised prices in 6 months if you have had at least 2 subs. Plus dropping the free online streaming, if you choose to pay for that (which I dont) its another $4/mo. My bill, after tax, was about $22/mo in January. With this new increase, the last one, and if I were to pay for online streaming I used to get for free my bill now would be over $32. A $10/mo increase since the merger is unacceptable.

[DouglasBubbletrousers]

BTW, copyright royalty board/RIAA, whoever, thats not the point. Rates are going up, thats the bottom line. I read on a forum that the actual cost of in the increase SiriusXM has to pay is 6 cents per sub per month. But we are getting hit with $2/mo rate increase. No, Im not confusing this the the 6% to 6.5%.

Also, does anyone forget there was a 3yr rate increase freeze imposed by the FCC when the merger went through? Of course SiriusXM can pass along fee increases to the sub base if need be as seen here.

[ibeetle]

You are exactly right. You can bet on two days after the 3 year rate freeze SiruisXM will be filling for bankruptcy. Because the day after the 3 year rate freeze is lifted they will raise rates by at least 20% and later that afternoon what few remaining subscribers will cancel there subscription.

Personally, I do not think the company will last 3 years. I am thinking the company is in pre-bankruptcy money grab mode.

[drbyte]

There's so many ads on sirius now, and on top of that you get so many 'in show' spoken ads and plugs you wonder if they can ever really make a profit no matter how many fee increases or sponsors they have. Its becoming more like the am/fm model everyday..

[C0mmanderB0nd]

Just as I am on the fence of whether or not to cancel XM, they give me another reason to leave.

I was already mad with the merger wheny they took away stations to consolidate, then create a premium extra for the "best of Sirius" content, to get the NFL and Howard Stern, so them merging takes away and any bonus they want me to pay for, that sucks!!!!

Then they put out an iPhone app, and as a loyal paying customer I get the shaft again because now they want me to pay extra to get to the content I already subscribe to through my iphone....

I also had a friend who got taken when they offered him a special deal on a lifetime subscription right before the announcement of possible bankruptcy.

In this economy satellite radio will be the first thing people cut from their budget.

[QuetzalcoatlUSA]

U.S. Music Royalty Fee? Don't blame Sirius/XM. Terrestrial radio lobbied hard to prevent the merger. Then when it was clear there was no way they could stop it, they lobbied to cripple the merged companies by forcing concessions like a "Music Royalty Fee" and giving away stations to shakedown artists, I mean "minority interests" like Georgetown Partners, who never invested one cent in the technology behind satellite radio. They did everything they could to break the backs of these companies by delaying the merger, so it should come as no shock that any of this is happening. They succeeded! Yeah! Pretty soon, we can all go back to listening to 20 minutes of commercials every hour on terrestrial stations with 50 song playlists operated by robots. And don't forget this happened during on the watch of Republicans, who are supposedly "business friendly". Har har.

[jmpetersen]

Two full subscriptions and 6 (!) family plan radios. I fixed up my whole family and a few friends with XM receivers 3 years ago, after I had two years of bliss. Life since the merger is a shallow imitation of what XM was 5 years ago. And now we're going to have to pay more for a perception of receiving less. I dunno, the phone company survives despite reasonable competition so maybe XMSirius will survive, but I'm putting my money on you nay-sayers!

Slacker radios are going to start replacing my XM's

[baconstang]

Everyone's whining about a royalty increase, but I don't hear much griping about the multi-multi million Stearn's making.

[eriknokc]

Very true! However, it was the executives who had to sign off on the offer of an outrageous amount of money to talk on the radio. Either way it's ridiculous.

[ohohmai]

I too bailed on S/XM recently. My gripe is if you PAY for radio, why isn?t the quality as good as HD-Radio which is FREE!!!!!!! Ditch all the crap content and increase the quality! Then I'll pay.

[cashbo77]

I just called and canceled Sirius - no more for me!

[BPMelvin]

One thing to remember Radio royalty payments are based on statistics of how many listeners and set by law on that premise. The area a radio station services is finite. Satellite potentially will cover many more listeners. The Performers and publishers etc then get paid for airplay.

There's got to be some means to get musicians paid

FWIW even copyrights for songwriters etc are going up in a few weeks to. Everything goes up...for the musicians and songwriters too.

[eriknokc]

I'm sorry but this is a way for this company to rake in some more money from their customers since there is not another choice for satellite radio (with the excpetion of our MP3 players). If they were eating the cost before, how come they are now passing the whole cost to the customers? I could understand if they were passing on the rise in cost, but they are not doing so. Many other companies CEOs are taking a pay in cut to do what they need to do to keep their businesses afloat. According to http://swz.salary.com in 2008 the CEO earned $32,219,055, the President of Sales and Operations earned $3,650,827, the President of Chief Content Officer earned $5,039,623, the Executive Vice President and Chief Financial Officer earned $3,715,773 and the Executive Vice President, General Counsel and Secretary earned $1,844,798. That's a total of $32,219,055 of pay towards the top executives and I am sure they are earning a raise this year because they are cutting costs and increasing their revenues. Most of us will never see that amount of money in our lifetime, unless we win the Powerball Lottery. We are suffering through pay cuts and/or reduced hours during this recession and we are having to foot the bill when these executives are living big at our expense. I say so long to Sirius XM, I am done and will never return. I encourage many other people to do the same to show Sirius XM they cannot take advantage of their customers.

[drbyte]

Wow. That's a lot of money for poor performance. Wish I could get that kind of gig.

I can't believe how Stern set up his deal, work 4 days a week, vacations every 3 weeks it seems. I bet the upper management and Stern just look at this whole Sat radio deal as a big cashcow until it eventually dies. With mp3 support and usb jacks now standard on all modern car stereos and store brought replacement radios, who needs radio?

[G|Net]

I knew this merger wouldn't be a good thing. Looks like the sat radio world needs a new company to enter the market and make Sirius ZM competitive again...

[dwimmer38]

Sirius can raise the rates without me. I'm cancelling. I'm tired of paying for commercials anyways.

[milrtime]

Last I read, they were still losing money. If they kept their rates around pre merger rates they would probably just be asking for bailout money by now.

How about they save a bunch of money by getting rid of the "DJs"!!!!???? I'm sure their salaries are a good chunk of change. I, for one, pay to listen to uninterrupted music. Doesn't matter whether it is classical, latin, rock or what. If I wanted to listen to someone talk, I'd subscribe to one of the talk shows. Just put it in "shuffle" mode and let me hear the music!!!!!

[lang0502]

Why is the FCC regulating satellite radio? There is no limit to the number of satellite and Internet radio services that can crop up if one of them is running a bad business model. If they want to charge $500 a month, they should be able to do that (they'd just be putting themselves out of business). Let the free market take care of this company.

[jhacker]

I've been trying to cancel Sirius for months, and they won't let me go. They keep giving me free months. I would be a little more understanding of this price increase if they hadn't raised fees several months ago. Now an additional receiver is $10 a month? I would pay half that for an additional DirecTV receiver. Not to mention the fact that they now charge $2.99 for internet streaming which used to be free. That is much more of a value!! Sirius/XM doesn't need the FCC to regulate their business. They're going to put themselves out of business with these price increases.