SoundExchange Officially Appealing Its Loss Against SiriusXM

SoundExchange is appealing its loss of a lawsuit against SiriusXM over allegedly unpaid royalties, with potentially significant consequences.

Performance rights organization (PRO) SoundExchange has filed an appeal following its loss in a lawsuit against SiriusXM stemming from allegedly unpaid royalties. Judge Naomi Reice Buchwald of the US District Court for the Southern District of New York dismissed the PRO’s lawsuit against SiriusXM last month, ruling that Congress never granted it authority to file lawsuits on behalf of rights holders for whom it collects royalties.

“In filing of a notice of appeal with the US Court of Appeals for the Second Circuit, SoundExchange has taken the first step in rectifying the lower court’s erroneous ruling and flawed interpretation of […] the US Copyright Act,” said SoundExchange in a statement released on Friday.

SoundExchange is authorized to collect and distribute performance royalties on sound recording under the Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act (DMCA) of 1998. However, Judge Buchwald ruled that the law, as it stands, “does not authorize SoundExchange to litigate royalty disputes.”

“As Congress surely realized in creating the statutory license, some licensees will seek any available means to avoid paying artists for the full value of their work to maximize profitability,” said SoundExchange, asserting that the ruling was “entirely wrong” in its interpretation of the law.

“For the statutory license to function properly, SoundExchange fully believes Congress intended that the ‘enforcement’ power clearly granted in the statute must necessarily include the ability of its administrator to bring litigation claims when digital music services fail to meet their obligations under the law.”

Further, SoundExchange says that while the courts are busy discussing the matter, SiriusXM “continues to apply its faulty methodology for determining its statutory obligations […] and to underpay artists for the use of their sound recordings.”

SoundExchange estimates that the impact of SiriusXM’s alleged underpayment clocks in at over $400 million. The PRO sued the satellite radio service in 2023 with allegations that SiriusXM had underpaid the royalties it owed on music recordings by around $150 million at the time.

The allegations assert that SiriusXM under-counted what it owed by allocating an excessive amount of revenue to the music streaming service it launched in 2017. Satellite radio services pay royalties as a percentage of their revenue, but the revenue used to calculate that number excludes certain avenues, such as webcasting. As a result, shifting revenue from satellite operations to streaming would lead to less owed in royalties to artists and rights holders.

SiriusXM has denied under-counting its satellite revenue and stands behind its royalty calculations as “rigorous, tested, and fair.”