What is Non-Interactive Music Streaming?

Non-interactive music streaming differs from on-demand, or interactive, streaming because it allows users to play music but does not allow them to select the song that plays next. Non-interactive streams generate a performance royalty for both the sound recording and composition of the song. The performance royalty associated with the sound recording of the song is paid to SoundExchange, while the performance royalty associated with the song’s composition is paid to the PROs.

Though it may seem like interactive streaming is the sole form of music consumption today, research and data show that non-interactive streaming is still very relevant. Given the popularity of this form of music consumption, its rapid growth since the beginning of the 21st century, and its huge potential to provide new and existing sources of royalties, any interested party should seek to understand the ins and outs of non-interactive music streaming and their implications for the future of the music industry.

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In this newsletter:

Sirius XM is facing a class action lawsuit in Washington state over its “US Music Royalty” fee, which adds 21.4% to the advertised subscription cost to cover music royalties.

A panel of music industry professionals will be convened by a new organization called AI:OK with the aim of agreeing global industry standards for the use of music in AI, and AI in music. Founder Martin Clancy says “we’re dedicated to making sure AI is used ethically”.

A group of UK songwriters and composers has filed a lawsuit against PRS For Music, their collective management organization. They aim to reform policies they claim are detrimental to their interests and those of the broader PRS membership.

Now, the details...

Exploration Weekly - June 28, 2024
Compiled by Ana Berberana

Sirius XM Faces Lawsuit Over ‘US Music Royalty Fee’ Surcharge That Adds 21% to the Monthly Subscription Cost

Sirius XM is being sued over its “US Music Royalty” fee, a surcharge added on top of the advertised subscription cost to cover what the satellite radio company owes the music industry. The fee increases the price of any US-based Sirius satellite radio subscription with access to music by 21.4%. The class action lawsuit filed in Washington state says any “reasonable consumer” would expect that the advertised price for the service would include any “fundamental costs” associated with accessing music content. No other music services, it insists, charge a separate royalty fee “over and above their advertised music plan prices.” “This action challenges a deceptive pricing scheme whereby Sirius XM falsely advertises its music plans at lower prices than it actually charges,” the lawsuit reads. “Sirius XM fails to include in its advertised prices the amount of its invented ‘US Music Royalty Fee,’ which increases the true plan price by 21.4% above the advertised price for the plans.” The lawsuit states that Sirius advertises its satellite radio subscription plans before applying the 21.4% fee, alongside the phrase “plus fees and taxes,” usually in a smaller typeface. Around 33.9 million subscribers are affected by this additional fee, which, according to the lawsuit, generates massive revenue; in 2023, the total music royalty fees collected by the company exceeded $1.36 billion — more than the company’s entire net profit of $1.26 billion. In the US, it’s common for sales taxes to not be included in the advertised price of a service because taxes vary by state. But the lawsuit claims that the additional fees Sirius charges are almost entirely the music royalty fee, especially in states like Oregon, which have no sales tax. The subscribers behind the lawsuit stress that they do not oppose creatives, labels, and publishers getting paid when music is played on Sirius services — but paying for music when you run a music streaming service is a core business expense, and shouldn’t be presented as an “added fee” to subscribers.

What is OK in the World of Music AI? New Organisation to Develop Industry Standards

A new organization called AI:OK has officially launched aiming to develop global industry standards and a kitemark scheme to allow people to “easily identify music that is ethically produced in the era of AI”. Based out of Dublin City University with support from the Irish government, AI:OK will form an advisory council of music industry professionals to discuss and determine “what is OK” when it comes to the development and use of AI in music. “We’re dedicated to making sure AI is used ethically, and that creators and consumers share the same confidence in the music we all listen to and create together”, says Martin Clancy, founder of the new scheme. “With AI continuing to evolve at a staggering rate, we felt it necessary to bring the music industry this much needed step forward”. There is a general consensus within the music community regarding the legal and ethical obligations of technology companies making use of existing music when developing generative AI models. That being that permission must be sought from the music industry. Many AI companies disagree on that point, although some are looking to collaborate with the industry as they develop their technologies. The aim of programmes like AI:OK is to recognise and champion that approach. The ambition is that musicians, creators and music fans will be influenced by an AI:OK kitemark when choosing AI tools and music generated by AI. There is, however, disagreement within the music community over the extent to which record labels and music publishers can license recordings and songs they own to AI companies without the specific consent of artists and songwriters. As a result, there is disagreement within the industry about what is “OK” - meaning that AI platforms deemed “OK” by labels and publishers may not have the approval of artists and songwriters. It remains to be seen if AI:OK’s advisory council can find some kind of consensus so that any AI platforms the scheme endorses are definitely “OK” with the entire music community.

Songwriters Take Legal Action Against PRS For Music Over Direct Licensing for Concert Royalties

A group of UK songwriters and composers, including Robert Fripp, have initiated a court action against PRS For Music, their own collective management organization. The action aims to overhaul the implementation of procedures and policies, which the group claim are prejudicial to their interests and to the interests of the wider PRS membership. They have been joined in this action by PACE Rights Management, a global operation that covers direct licensing of live public performance rights (the right to publicly perform a composer’s music and/or lyrics by way of live performance). According to a statement, the issues at the heart of the legal action are: The right of music writers and publishers to efficiently direct license their live public performance rights, without having to go through PRS. Direct licensing would allow writers and publishers to benefit from fewer deductions from their royalty income, faster royalty payments and greater transparency throughout the process, according to the group of songwriters. They further claim that PRS is deliberately withholding information from its members about the deductions from their royalty income when their rights are licensed internationally via PRS. The writers behind the action also say that the implementation of the Major Live Concert Service (MLCS), which awards preferential conditions to certain rights-holders, is in direct conflict with PRS’ obligations as a collective management organization. In a collective statement, the claimants in the legal action said: “From a theoretical or academic perspective, the efficiencies of collective rights management make perfect sense for songwriters and composers. However, PRS has strayed significantly from the principles on which it was founded 110 years ago, to the point that the organization’s policies no longer appear to be operating in the best interests of its members. PRS Members are treated as second-class citizens in their own organization.

Major Record Companies Sue AI Music Generators Suno, Udio for ‘Mass Infringement’ of Copyright

Among AI music generators capable of creating entire songs with just a prompt, Suno and Udio are considered by many to be among the best. They are also considered by many to have used copyrighted music to train their AI models, without authorization. Now, the Recording Industry Association of America (RIAA) is coordinating lawsuits on behalf of major recording companies against the two AI companies. The lawsuit against Suno was filed in the US District Court for the District of Massachusetts, while the lawsuit against Udio was filed in the US District Court for the Southern District of New York, over what the RIAA calls “mass infringement of copyrighted sound recordings copied and exploited without permission by two multi-million-dollar music generation services.” “AI companies, like all other enterprises, must abide by the laws that protect human creativity and ingenuity,” the complaints against Suno and Udio state. “There is nothing that exempts AI technology from copyright law or that excuses AI companies from playing by the rules.” That assertion is likely to be the key point of contention in the lawsuits. US courts have not yet ruled that using copyrighted materials to train AI amounts to copyright infringement.

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