Sirius, Three Music Firms Settle

By Joseph Palenchar -- TWICE, 3/24/2006

New York – It looks like Sirius Satellite Radio avoided a lawsuit from at least three of the four largest music companies over continued sales of its S50 headphone stereo, which stores compressed-music files and time-shifted Sirius content for on-the-go listening.

Meantime, XM Satellite Radio said deliveries of its hybrid MP3/satellite-radio portables have been pushed back slightly until sometime in the second quarter and that deliveries aren’t dependent on talks with the music companies. During CES, the companies marketing the products – Samsung and Pioneer – cited first-quarter deliveries, but XM now says “March-April” delivery had been announced at the show.

The Sirius S50 and XM’s models have been publicly described by Universal Music Group executive Larry Kenswil as “cannibal machines.” The products let consumers store time-shifted satellite-delivered music for later recall by title, artist, or genre, and Kenswil, president of Universal’s eLabs new technology division, complained they were designed “to increase satellite subscriptions at the complete expense of the ability to sell music.”

For its part, Sirius said it reached a “satisfactory agreement” with Universal Music Group and “resolved issues” with Warner Music and Sony BMG. Of the big four music companies, that leaves EMI without an agreement with Sirius, but EMI acknowledged that it is “in discussions related to the S50.” Sirius declined to comment on published reports that it agreed to pay the music companies royalties on the sale of each S50 and agreed to limits on S50 production.

In a statement, Sirius said it and UMG Recordings “have entered into a satisfactory agreement with respect to the S50 and are in productive business discussions regarding the distribution of future products.”

As for Warner and Sony BMG, Sirius would only say that “we’ve resolved issues related to the S50.”

The S50 will “soon” be joined in the market by four MP3/XM hybrids, an XM spokesman said. “We will have significant quantities of all four for the second quarter,” he said without being more precise. “At CES,” he claimed, “we talked about March-April for all four.”

The spokesman added, “XM continues to have constructive business discussions with the record companies, which are important business partners for us.” But shipment isn’t dependent on the results of the talks, he claimed.

XM’s four models include the Pioneer Inno and Samsung Helix headphone stereos, which receive live satellite programming, store compressed-music files transferred from a PC, and store time-shifted XM songs for later playback. Samsung also announced two versions of the neXus, which like the Sirius S50 time-shifts satellite-radio content when docked with a home satellite tuner. The S50 and neXus also store compressed-music files transferred from a PC. The neXus models were originally planned for fourth-quarter 2005 availability.