XM Asks That RIAA Suit Be Dismissed - Rightly So
July 18, 2006
Last week Satellite Standard Group listed several potential positive items that XM Satellite Radio may be able to announce or clarify for investors. One of those items was comments about the RIAA lawsuit which seeks $150,000.00 compensation for each song that has been recorded on the new Pioneer Inno and similar devices.
Yesterday the news that we were hoping to see came to light.
XM Satellite Radio asked a Federal Judge to dismiss the RIAA suit.
We here at SSG have speculated that the RIAA suit was a strong-arm tactic to try to get XM Satellite Radio to the negotiating table. The RIAA appears to be taking whatever steps it can to change the current way consumers enjoy music. Along with the lawsuit, the industry is also backing controversial legislation called the PERFORM Act, which would in effect regulate the royalties for all songs played, but spares terrestrial radio (including the fledgling HD Radio) from paying any such fees.
In the XM request to have the RIAA suit dismissed, XM cited the current consumer protection outlined in 1992 represent "Congress' efforts to insure that the powerful recording industry would not be able to restrict the right of consumers to record songs that are broadcast over the radio or stifle innovation by chilling the development and use of the latest recording technologies." Ironically, the RIAA supported the law as written in 1992.
On the side of the RIAA, Jonathan Lamy, a spokesman for the group classified XM Satellite's legal arguments as "arcane."
We here at SSG would suggest that the business model of the RIAA is arcane. What is happening is that an organization such as the RIAA failed to adjust their business model to account for items such as satellite radio, I-Pods, etc. The RIAA still insists on letting terrestrial radio play each and every song for free, even with HD Radio coming onto the scene. SSG has pointed out numerous devices that are capable of recording and segregating songs directly off of FM or HD radio. These devices are already in the process of getting FCC approval. If the RIAA felt that such devices were illegal, they should be filing injunctions for those units as well.
Satellite Radio has become one of the biggest source of income for the RIAA. The volume of music played by XM and Sirius is incredible, and artists reap a direct reward from that. Now, instead of embracing this windfall that did not exist prior to satellite radio, the RIAA is deciding to bite the hand that is feeding it.
A major consideration in this action will be the opinion of the Consumer Electronics Association (CEA). The CEA has also filed papers in court, in which they sided with sided with XM Satellite Radio. The CEA expressed that they feel XM Satellite Radio was protected by the 1992 law. Additionally, another organization has joined the fight. The Home Recording Rights Coalition joined CEA in their court filing.
As readers may be able to tell, Sirius has been pretty silent on the issue. Sirius had previously come to an agreement with the RIAA specific to their S50 model. Like the Inno and Helix, the S50 has similar recording capabilities. Because an agreement has been reached between Sirius and the RIAA, there has been no suit against Sirius.
For the moment this leaves XM taking the brunt of a legal defense, with Sirius waiting in the wings. A positive outcome for XM would also bode well for Sirius. Whether or not Sirius joins in the effort is yet to be determined.
As a consumer your hands are not tied. You can express your beliefs to your senators and representatives regarding the PERFORM Act legislation. Should consumers win in defeating this legislation, any case such as the current one filed against XM by the RIAA will have a lot of wind taken from its sails.
7/18/2006 01:52:00 PM
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