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New Royalty Rates Set For Satellite Radio

Washington — The Copyright Royalty Board (CRB) yesterday set a new royalty rate payable by XM Satellite Radio and Sirius Satellite Radio, starting at 6 percent.

XM and Sirius said the CRB determined they should pay an individual rate of 6 percent each of gross revenues for 2007 and 2008, increasing by 0.5 percent for each year thereafter, to 8 percent in 2012 when the license period ends.

When asked what the previous royalty rate was, XM would not comment. Sirius also did not immediately comment.

Sirius executive VP and chief financial officer David Frear said it was too soon to determine if Sirius will challenge the ruling. Both companies have 15 days from the decision yesterday to move for a rehearing.

“We just received it last night. There are more than 80 pages in the decision I have not seen yet,” Frear told analysts at a UBS Global Conference today. He said of the new rate, “I don’t think it changes our contribution margins.”

XM chairman Gary Parsons said, “Today’s ruling by the Copyright Royalty Board brings to an end a year-long proceeding with the record labels and provides our company certainty regarding music performance royalties to be paid through 2012.”

Both XM and Sirius noted that the royalty rate of 6 percent of gross revenues is not paid on all revenue. Frear said revenue from advertising and from talk, news and sports channels, plus other revenue, is excluded.

The royalties will be paid to SoundExchange, an independent, nonprofit performance-rights organization that collects and distributes digital performance royalties for recording artists and record labels when the artists perform on digital media such as cable TV, Internet radio and satellite radio.