Digital Recording Of Satellite Radio Not Challenged By RIAA
January 4, 2005

Last summer, electronics manufacturers Time Trax Technologies and Delphi released devices that allowed satellite radio subscribers to record digital tracks from their receivers to a computer or personal music device (such as the iPod).  Just several weeks before that, the RIAA had sent a letter to the FCC that described the ability to record high-quality copies from digital broadcasts as the "perfect storm" for the music industry.  The RIAA is afraid that the recording of digital broadcasts could lead to increased pirating of music and might ruin the recording industry and online music retailers.  However, when asked to clarify the letter, Jonathan Lamy, a spokesperson for the RIAA, said the letter applied to digital broadcasts of terrestrial radio only (or HD radio) and not satellite radio. 

A closer look at the economics of the issue reveals a bit more about the curious position of the RIAA.  Artists and record labels are compensated from terrestrial radio based on the number of times a song is played and this model does not take into account the total revenue of a radio station or parent company.  Conversely, the compensation from the satellite companies is based entirely on revenue.  "When songs get played on satellite radio, recording artists get paid more money than when they get played on terrestrial radio," Sean Butson, a media analyst with financial services company Legg Mason, told Wired.  According to Butson, seven percent of the total revenue from the satellite companies is paid out to artists and copyright holders.  As a result, there is a possible motivation for the RIAA to favor the growth of both XM and Sirius, even if it means that the recording (and illegal distribution) of copied digital tracks increases.

Moving beyond a simple economic motivation, the potential audience for digital radio is also much larger than that of satellite radio.  The FCC is poised to require radio stations to transition from analog to digital broadcasting in the next few years, and some people believe the RIAA is simply going after the bigger threat.  Whatever the reason, this issue is nowhere close to a resolution.  In the coming months, a handful of new devices that allow the high-quality recording of satellite radio will be released.  While some of the devices include a process which records the satellite receiver's serial number into the song to making tracking easier, not every device has those features.  The Supreme Court is also set to hear the case of MGM vs. Grokster later this year.  The ruling in that lawsuit could greatly effect this issue, and change the influence of technology on the music industry for years to come.

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Jon Zellner
EVP/Programming Operations

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