Slumping Sirius XM Hurts Music Biz, Too

$1 Billion In Debt Coming Due

Barely three months after the long-delayed merger of satellite radio companies SIRIUS and XM, the newly combined SIRIUS XM RADIO is struggling to stay afloat, reports MSNBC. The company has just another three months to start paying down more than $1 billion in debt that's maturing in 2009 at a time when credit markets are freezing up. It remains heavily dependent on automobile sales for new subscriber additions just as U.S. car sales are tanking. And its stock price is in a yearlong free-fall that has sparked an investor lawsuit.

For the music industry, the fate of SIRIUS XM looms larger than before. Under a U.S. COPYRIGHT ROYALTY BOARD decision made last DECEMBER, satellite radio broadcasters like SIRIUS XM pay performance royalties for sound recordings based on a percentage of adjusted gross revenue. That means the better SIRIUS XM does, the more money labels and publishers make.

That rate currently stands at 6% and is set to increase by half a percentage point every year until 2012, when it will reach 8%. Neither SOUNDEXCHANGE -- which collects those fees and distributes them on behalf of the music industry -- nor SIRIUS XM will reveal exactly how much the company is paying in royalties. According to SIRIUS XM's quarterly reports, the company paid out a combined $92 million in revenue-sharing and royalty payments during the first half of 2008. That includes payments to SOUNDEXCHANGE and other partners, like equipment suppliers.

« see more Net News