June 23, 2006
With the recent noise and confusion around ongoing negotiations between XM and the recording ndustry, we feel that it's important to speak to you directly at this time.
We want to make clear that XM's respect for you is at the core of what we do. We provide artists from all genres with a unique connection to their fans, and unlike many new services in the age of digital music, we built our business from the very beginning on respect for copyrights and compensation for artists.
XM CONNECTS ARTISTS WITH MUSIC LOVERS
XM programs 69 channels of commercial-free music that help our listeners discover new artists and rediscover artists that they know and love. We also create original music programming, like "Artist Confidential," "Artist2Artist" and "Offstage," along with a number of exclusive music shows hosted by some of our greatest living musicians. These are all unique and highly effective ways for artists to connect with their fans from coast to coast and share the music that inspires them. And that connection through XM leads to music purchases.
XM Pays Artists and Songwriters Tens of Millions in Performance Royalties
All artists and songwriters get paid when their music is broadcast over XM. In fact, the satellite radio industry is the single largest contributor of sound recording performance royalties to artists and record labels – royalties that FM has never paid. Plus, we pay millions more annually in performance royalties to songwriters and music publishers. In the coming years, we expect that satellite radio will pay hundreds of millions more in performance royalties to the music industry.
XM's New Radios Provide Time-Shifting Functionality – Not Downloads
You have probably heard about our new radios – the Inno and Helix. A lot of what's out there is misinformation. Some have characterized these products as download radios – they are not. They simply enable listeners to save songs off the radio for playback later – the 21st century equivalent of a cassette recorder, in the same way that TiVo allows them to save TV shows for later viewing. XM subscribers cannot choose the tracks that XM plays. And unlike download services, XM subscribers never own the programming that they record from XM – it cannot be burned to a CD, transferred to other radios or uploaded to the internet. In addition, XM subscribers can only listen to recorded XM content as long as they keep an active XM subscription.
XM Generates Strong Demand for Music
Much like how home video recording led to the phenomenal success of DVDs and now, on-demand services, we believe that the XM service and these new radios will generate more interest in, and more sales of your music. XM has partnered with the new, legal Napster online music service to make it easy for our subscribers to purchase and download a permanent copy of songs that they hear on XM and want to own.
In addition, artists receive additional payments from the sale of these new radios. The radio manufacturers pay royalties through a per-radio payment added to each digital recording radio sold in the U.S. under the Audio Home Recording Act (AHRA), established by Congress and fully supported by the music industry.
We are in the midst of a difficult negotiation with the major labels. These disagreements tend to get heated before they get resolved. Please remember: business is business, but artists are family.
Again, thank you on behalf of the more than 6.5 million XM music fans who appreciate the passion and innovation that you bring to your craft. If you have questions or comments, please do not hesitate to e-mail me at email@example.com. I look forward to continuing and building upon our terrific partnership.
Executive Vice President
XM Satellite Radio