According to a press release from XM Satellite radio, the royalty rates for SDARS services have been determined.
The rates came in better than many were anticipating with performance license rates of 6.0% of those gross revenues subject to the fees for 2007 and 2008 to increase by .5% over the next 4 years, with certain revenues that are exempt from royalty payments.
Although this issue has been perceived as a “back-burner” issue by many, it carries great importance for the business model of satellite radio. Check out the full press release after the jump.
XM PRESS RELEASE
WASHINGTON, Dec. 4 /PRNewswire-FirstCall/ — On December 3, 2007, the Copyright Royalty Board (CRB) issued its determination and order setting the royalty rate payable by XM Satellite Radio (Nasdaq: XMSR – News) under the statutory license covering the performance of sound recordings over the XM system for the six-year period starting January 1, 2007 and ending December 31, 2012. Under the terms of the CRB Satellite Radio Services, XM will pay a performance license rate of 6.0% of those gross revenues subject to the fees for 2007 and 2008, 6.5% for 2009, 7.0% for 2010, 7.5% for 2011 and 8.0% for 2012.
The revenue that is subject to royalty fees includes subscription revenue from our subscribers and advertising revenues from channels other than those that use only incidental performances of music. Other exclusions and deductions from revenue subject to the statutory license fee include but are not limited to revenue from channels, programming and products or other services offered for a separate charge where such channels use only incidental performances of sound recordings, revenue from equipment sales, revenue from current and future data services, fulfillment service fees, and bad debt expense.
“Today’s ruling by the Copyright Royalty Board brings to an end a year- long proceeding with the record labels and provides our company certainty regarding music performance royalties to be paid through 2012,” said Gary Parsons, Chairman, XM Satellite Radio. “Moreover, the music performance fees set by the CRB are in the range projected by many financial analysts who cover this industry. XM remains strongly committed to providing consumers the very best in both music and non-music programming, to compensating artists for their creative work, and to providing our shareholders a fair return on the multi-billion dollar investment in this new audio entertainment platform.”
Parties have 15 days from the December 3, 2007 decision to move for rehearing. Once the CRB has considered any rehearing motions, the Librarian of Congress will publish the final determination in the Federal Register. Parties will have thirty (30) days from that publication to appeal the decision to the U.S. Court of Appeals for the District of Columbia.
Existing 2007 financial guidance does not include the effect of this arbitration decision on 2007 financial results.
Position – Long Sirius, XM