Sirius’s Move to Bypass a Royalty Payment Clearinghouse Causes an Uproar

The flow of royalty payments, counted in pennies and nickels, may be the least glamorous part of the music industry. But because those royalties are the foundation of almost everyone’s paycheck, any change to the system can be controversial. Sirius XM Radio set off a flurry of complaints from trade groups and labor unions late last month. It was trying to bypass the standard method of paying for digital streams — through a royalty clearinghouse called SoundExchange — and negotiate directly with record labels. Sirius’s move was only the latest example of a gradual shift in the financial infrastructure of music. Many companies, from major labels to providers of background music, have been trying to reduce costs and gain control by circumventing the large organizations that have historically processed licenses and royalties. Such direct deals are perfectly legal. But opponents of the move by Sirius say that it could result in less money and more complications for artists. Mel Karmazin, the chief executive of Sirius, says that direct agreements with labels offer more flexibility than is available through the basic compulsory licenses processed by SoundExchange.