Monday, November 13, 2006 SSG Response To SoundExchange
  November 13, 2006 As reported here and on various other sites SoundExchange reported that they conducted a survey of 428 randomly selected individuals, and posted their interpretation of the results: SoundExchange
“Almost half of all respondents (43 percent) said they would cancel their subscription (or not subscribe in the first place) if satellite radio lacked music. That is triple the number of respondents who would cancel if any other type of programming were unavailable.”SSGInteresting that 43% somehow equates to “almost half”. Think of it this way. If 43 people drink Coke and 57 people drink Pepsi, is that a split down the middle in terms of market share? This is not to say that Music is not an important factor in satellite radio. It is, and no one will doubt that. However, it is COMMERCIAL FREE music that is what drives the value here….Not simply the music. It is the VARIETY that is the driver……Not simply music. Did the survey compare music to ALL other programming, or was the question phrased in such a way as to solicit a certain response. It would be interesting to see the survey questions, as well as the results. Further, SoundExchange MUST consider other factors such as build-out costs, etc. Additionally, the other programming brings in revenue above and beyond the subscription price in the form of advertising.SoundExchangeFifty-three percent of respondents cited music as the most critical programming factor in their decision to subscribe to satellite radio. SSGI notice the word “half” has disappeared. Is that because 53% is already greater than “half”? Again, I think everyone would agree that music has a role, the question is whether or not this posturing does.SoundExchangeRespondents spend nearly half (49%) of their time listening to music programming. SSGA much better use of the word “half” here. I would not disagree that people listen to music. The result of this question seems to not jive with question #1 though. This leads me to believe that the form of the questions in this survey may be suspect.SoundExchangeIf music were not available, respondents on average would only be willing to pay $6.15 per month for satellite service, not the current $12.99 per month.SSGAgain, I would like to see the question and how it was phrased. It strikes me as odd that this statement was not “respondents stated they would pay $6.84 for music” SoundExchange“The survey of 428 randomly selected individuals -- all either current XM or SIRIUS subscribers or considering subscribing within 30 days -- demonstrates the overwhelming importance of music to XM's and SIRIUS' ability to grow their subscriber base. "One clear takeaway from this survey is that the foundation of satellite radio is built on music. Without music, satellite services would crumble," said John Simson, executive director of SoundExchange. SSGI would be curious to see how the director defines overwhelming. Most of the metrics that were supplied spoke about “half” Where I am from “half” does not equate to overwhelming.SoundExchangeMusic's value unappreciated by XM and SIRIUS
Under the Digital Millennium Copyright Act of 1998, certain digital services, including satellite radio, are permitted to stream any sound recordings that have been released to the public -- regardless of whether or not they have received a separate license from the record label or other copyright owner. The royalty rate is determined by the CRB as part of a public rate-setting proceeding.SSG
The statements about the Digital Millenium Copyright Act of 1998 are accurate. The current rate is between 3 and 4%. The Current rate for music on cable TV, without DJ’s and other programming costs is 7.5%. By what measure does SoundExchange come up with 10%? Further, the current rate was established when commercial free music was the business plan of satellite radio. As the services launched it became increasingly clear that it would take a vast array of content aside from music to make the service compelling enough for wide spread adoption. If anything, this one factor should point to a percentage LESS than the current 3% to 4%. NOT more than current levels.SoundExchange
In their filings before the CRB, XM and SIRIUS proposed a rate of less than one-percent of their total revenue for each of the next six years. The royalties from this minor payment would need to be shared among the tens of thousands of copyright owners and performers whose recordings they play. By contrast, SoundExchange, citing the fundamental importance of music to satellite radio, proposed an escalating scale beginning at 10 percent of revenues in 2007.SSGYou call these payments “minor”, but fail to acknowledge a few key points. First, many of the artists would receive very little if not for the satellite radio platform. Because there is so much music played, the number of artists that now get exposure is overwhelming larger than with any other medium. Second, the percentage is based on overall revenue. This means that SoundExchange would benefit from advertising that is on NON MUSIC channels. Consider that in 2010 Sirius and XM combined bring in $7,000,000,000. The SDARS proposal at 0.88% would generate $61,600,000 in 2010. As revenue increases, so would the amount of money paid to SoundExchange.SoundExchange
"We are great fans of satellite radio. The wide variety of music offered on dozens of channels and the depth of the music catalogue offered to consumers is terrific. The mutual dependence that has evolved between satellite radio and the labels and artists who provide the music cannot be understated. It is in many respects a partnership. However, it is time for the satellite companies to pay artists and copyright holders a fair royalty. Not giving artists their due -- and proposing a rate of less than one percent of their revenues -- is clearly a slap at the music community. SIRIUS currently pays Howard Stern at least $100 Million per year for content on a couple of channels. At their proposed rate, their payment for music on 64 channels would equal less than one-tenth that amount," added Simson.SSGThe Howard Stern comment is gratuitous and here is why. Howard Stern receives a premium because he is EXCLUSIVE to Sirius. Should SoundExchange make their music EXCLUSIVE, I am sure that Mel Karmazin would happily step up to the plate (or XM for that matter). The 1/10th comment is also a misrepresentation on the part of SoundExchange. I have already shown that in 2010, the amount would be over $66 million., and with the expotential growth of the sector, the royalties paid would be far better in 2011, 2012 and 2013. Additionally, i would suggest that you look at the alexa data surrounding satellite radio. A two day promotion surrounding Howard stern generated hundreds of thousands of hits to Sirius. Recent television spots for XM and Sirius centered on MUSIC have not generated that kind of BUZZ.To be fair. No one will argue that music is not a big part of satellite radio. Just as you should not argue that news, talk, entertainment, and sports are not a big player. SoundExchange needs to recognize the cost of the platform that pays more in royalties than any other source. Satellite radio needs to recognize that there is value in the music it plays. It would appear that on the level of an offer to share a percentage of OVERALL revenue, satellite radio has taken a step to ensure reasonable compensation Not only does SoundExchange benefit from air time of songs, but also from non-music advertising, as well as a chance to participate in the GROWTH that is happening in satellite radio. Satellite Radio is offering more than a “services rendered payment”. Satellite radio is offering a virtual piece of the overall pie, and a benefit no matter how many people listen to the music.It is expected that the Copyright Rate Board will adopt a rate by the end of 2007 or early 2008. 11/13/2006 07:13:00 PM
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