Although SoundExchange has served as the designated royalty collector for digital audio transmissions since its founding, a recent federal court ruling has greatly undermined its ability to enforce payment obligations through litigation.
Judge Naomi Reice Buchwald’s decision emphasized that Congress deliberately omitted granting SoundExchange a private right of action to litigate royalty disputes under Section 114 of the Copyright Act, effectively blocking the organization’s attempt to recover allegedly unpaid royalties from SiriusXM.
Congress deliberately denied SoundExchange litigation rights under Section 114, preventing recovery of millions in disputed royalties.
The dispute, which began in August 2023, centers on SiriusXM’s alleged manipulation of royalty calculations for its satellite and webcasting services. SoundExchange initially claimed approximately $150 million in underpayments, but that figure has since ballooned to over $400 million when including late fees.
At issue is SiriusXM’s method of calculating royalties for bundled services that combine satellite and internet radio offerings, which SoundExchange contends artificially reduces the company’s payment obligations.
Despite functioning as a nonprofit entity jointly managed by copyright owners and artists, SoundExchange’s statutory role under Sections 112 and 114 of the Copyright Act is primarily administrative. The organization collects and distributes digital performance royalties but lacks explicit authorization to sue for enforcement, unlike other copyright sections such as Section 115 and provisions for the Mechanical Licensing Collective that expressly empower litigation rights.
The court’s reasoning highlighted this critical distinction, noting that the absence of litigation authorization in Section 114 represents a deliberate congressional choice. Judge Buchwald rejected SoundExchange’s arguments by analogy to other statutory licenses, finding no evidence in legislative history supporting an intent to empower SoundExchange with private enforcement rights.
This ruling creates a significant obstacle for SoundExchange’s advocacy efforts on behalf of artists and rights holders, effectively separating the legitimacy of unpaid royalty claims from the organization’s capacity to enforce them through direct litigation. Unlike traditional performing rights organizations that have established frameworks for enforcing royalty collection, SoundExchange faces unique challenges in executing its mandate without litigation authority. The outcome highlights the importance of musicians diversifying their income through sync deals and other revenue streams rather than relying solely on streaming royalties. SoundExchange has expressed strong disagreement with the ruling and is considering options including filing an appeal or state lawsuits.
Alternative enforcement mechanisms remain available to SoundExchange, including audits and investigations as suggested by the court, though these provide less direct leverage than federal litigation would have.
SiriusXM’s successful motion to dismiss on grounds of lack of statutory standing has potentially wide-ranging implications for royalty collection enforcement throughout the digital music ecosystem.
