Sirius, XM royalties set

By Sue Zeidler

LOS ANGELES (Reuters) - U.S. copyright authorities on Tuesday set new song recording royalty rates for proposed merger partners Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., that were in line, or lower than Wall Street expectations.

The Copyright Royalty Board of the U.S. Library of Congress set royalties for sound recordings at 6 percent of gross revenues for 2007 and 2008, with some exclusions, 6.5 percent for 2009, 7 percent for 2010, 7.5 percent for 2011 and 8 percent for 2012.

SoundExchange, the music industry group that collects royalties, had sought rates starting at 8 percent and rising.

"We're happy that they valued the music higher (than presently) but would have been happier if the rates had been set higher (still)," said Richard Ades, a spokesman for SoundExchange.

Neither XM nor Sirius had released royalty levels before, although Wall Street analysts widely believe they have been paying between 4 percent and 7 percent.

XM in a statement said the range was broadly in line with predictions by financial analysts.

"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," Gary Parsons, Chairman of XM, said in a statement.

Deutsche Bank analyst James Dix said he viewed the CRB decision favorably. "The CRB ruling appears better than we had forecast," he said, saying the new rates would cut $50 million from his forecasted 2008 annual royalty costs for Sirius.

The U.S. Department of Justice is expected to rule soon on the merger of Sirius and XM in an all-stock deal worth about $5 billion. The merger, announced last February, has been criticized as anti-competitive by some U.S. lawmakers, consumer groups and the traditional radio industry.

Sirius and XM must win approval from the Justice Department's antitrust division, as well as from the Federal Communications Commission, for their deal to be completed.

Janco partners analyst April Horace said the rates set on Tuesday by the CRB were "pretty neutral," but believed they were positive in that they removed some uncertainty overhanging the companies as they await regulatory approval for their merger.

"I believe the satellite operators had been paying in the 6 percent to 7 percent range," she said. "I think this was a hurdle they needed to get over in order to get a resolution on the merger."

The royalty rate would not apply to all revenue, with revenue from advertising and from talk, news and sports channels, plus other revenue, being excluded, according to the companies.

The parties have 15 days from the December 3, 2007 decision to move for rehearing.

(Reporting by Sue Zeidler, editing by Carol Bishopric)