Summary
Senate passes Music Modernization Act.
Sirius XM withdraws its appeal plans.
Rate set at 15.5% until through 2027.
Sirius XM (SIRI) received some positive news on the issue of royalties this week when the Senate passed the Music Modernization Act. The legislation is not yet law, but it is well on its way to that status. Royalties will increase from 11.5% to 15.5%, which is a negative, but the length of time that the 15.5% will be in effect was extended to 2017, which is a positive. Once passed, the resolution of royalties will allow Sirius XM to better project its costs and therefore better plan its service and bundling.
What we have here is a compromise which allows both sides to have a victory while also allowing both sides to model their respective businesses for a longer term. Royalties for music have been a tough negotiating point for many years. For the most part, royalties are a pass-through cost that is absorbed by the subscribers of the respective service.
Sirius XM contended that certain aspects of the bill were not fair and did not create a level playing field. The satellite radio provider wanted the 801(B) standard to remain in place, wording which ensures royalties it pays for pre-1972 recordings were divided evenly between artists and musicians, and to a desire that satellite and terrestrial radio be treated equally.
