SoundExchange, the recording-industry nonprofit responsible for collecting and distributing digital music royalties, sued satellite-radio giant Sirius XM in Virginia federal court on Wednesday for allegedly underpaying more than $150-million in royalties.
SoundExchange accused Sirius XM of “gaming the system” by attributing revenues from its satellite-radio service to its streaming radio to avoid paying higher royalty rates.
Representatives for Sirius XM did not immediately respond to a request for comment on the lawsuit.
SoundExchange CEO Michael Huppe said on Wednesday that the group was “forced to litigate” on behalf of artists and copyright owners “only because our repeated efforts to resolve this dispute have failed.”
The Copyright Royalty Board, the U.S. government body that sets royalty rates for broadcasting sound recordings, has set separate rates for satellite radio and web-based radio, using gross revenue to calculate satellite rates and a per-transmission fee for internet radio.
Sirius XM, the only satellite-radio company in the United States, bundles its service with internet-based streaming radio. SoundExchange said satellite radio drives the “lion’s share” of Sirius XM’s $9-billion in annual revenue, and internet radio subscriptions are not a “material part” of its user base.
The lawsuit said Sirius XM falsely reported “dramatic increases” in revenue attributable to internet radio in 2021 in a “cynical attempt to avoid paying the royalties it plainly owes.”
The complaint separately said that an independent auditor determined that Sirius XM underpaid its royalties from 2018 by millions of dollars, and that the company has argued it “owes only roughly 3 per cent of that amount and refuses to pay the rest.”
SoundExchange previously sued Sirius XM for unpaid royalties in 2013. The dispute was settled in 2018 for $150-million.
The case is SoundExchange Inc v. Sirius XM Radio Inc, U.S. District Court for the Eastern District of Virginia, No. 1:23-cv-01083.