Satellite radio competitors Sirius and XM agreed to a three-year rate freeze in order to win FCC approval of their merger. However, there is an exception, so Sirius XM will be raising rates on July 29th.
As first reported by the website TechDirt.com, Sirius XM has notified subscribers that their $12.95 basic monthly subscription fee will increase by $1.98 to $14.93, effective July 29th. The increase is allowed, despite the three year freeze, because Sirius XM is permitted to pass along increases in performance royalty fees.
The US Copyright Royalty Board increased the rate which the satellite service had been paying – 6% of gross revenues – to 6.5% for 2009. It will rise to 7% in 2010, 7.5% in 2011 and 8% in 2012.
“Notwithstanding the voluntary commitment [to freeze rates for three years], after the first anniversary of the consummation of the merger, the combined company may pass through cost increases incurred since the filing of the merger application as a result of statutorily or contractually required payments to the music, recording and publishing industries for the performance of musical works and sound recordings or for device recording fees,” read the FCC Report and Order approving the merger. That first anniversary is July 29th and Sirius XM is wasting not one second in implementing that rate hike.
Although the hike in royalty payments is an 8.3% increase, Sirius XM is apparently calculating the music royalty portion of the subscriber charge as a line item independent of other overhead costs to come up with the 15.3% increase for subscribers.
“Unfortunately, we cannot control the Copyright Royalty Board’s rate increase, but we can offer you ways to save on your subscription. The longer your subscription, the more you save!” the letter said, offering various incentives up to nine free months for signing up for a three-year subscription.
RBR/TVBR observation: Unlike Internet streamers, who fought RIAA’s excessive performance royalties, and AM & FM broadcasters, who are still battling to remain free of them, the satellite guys embraced the payments to the multi-national record labels. And why not? They alone have to ability to tack rate increases onto their customers’ bills – at least until the customers decide to cancel.
By the way, do you know of any US AM or FM station that would be able to continue broadcasting if it had to hand over 8% of gross revenues to the record labels in addition to all existing operating costs? So much for the claims that broadcasters don’t really have to fear performance royalties.