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Last week, the music industry sued XM over its new portable music devices. The devices allow users to record XM content and play their own MP3s, but do not allow music to be copied to a PC or otherwise transferred. Songs can be marked for purchase via XM + Napster, the joint venture of XM and Napster. XM has marketed it as a TiVo for XM users. The stock dropped nearly 40% on the news of the lawsuit.

The RIAA is contending that the devices require a license because it is a music service, similar to iTunes. Sirius has paid the license for its latest portable music players that have the same functionality and the RIAA is hoping that XM will roll over and pay the licenses as well. The RIAA is seeking damages of $150,000 per song recorded by XM’s customers, an amount that will quickly escalate into the billions as customers purchase the new radios. XM fired back with a message to its subscribers (also posted on their website).

Statement to XM Subscribers - The XM Nation

Everything we’ve done at XM since our first minute on the air is about giving you more choices. We provide more channels and music programming than any other network. We play all the music you want to hear including the artists you want to hear but can’t find on traditional FM radio. And we offer the best radios with the features you want for your cars, homes, and all places in between.

We’ve developed new radios — the Inno, Helix and NeXus — that take innovation to the next level in a totally legal way. Like TiVo, these devices give you the ability to enjoy the sports, talk and music programming whenever you want. And because they are portable, you can enjoy XM wherever you want.

The music industry wants to stop your ability to choose when and where you can listen. Their lawyers have filed a meritless lawsuit to try and stop you from enjoying these radios.

They don’t get it. These devices are clearly legal. Consumers have enjoyed the right to tape off the air for their personal use for decades, from reel-to-reel and the cassette to the VCR and TiVo.

Our new radios complement download services, they don’t replace them. If you want a copy of a song to transfer to other players or burn onto CDs, we make it easy for you to buy them through XM + Napster.

Satellite radio subscribers like you are law-abiding music consumers; a portion of your subscriber fee pays royalties directly to artists. Instead of going after pirates who don’t pay a cent, the record labels are attacking the radios used for the enjoyment of music by consumers like you. It’s misguided and wrong.

We will vigorously defend these radios and your right to enjoy them in court and before Congress, and we expect to win.

Thank you for your support.

I have and love XM. We travel a lot on weekends (which is why I don’t have a whole lot of weekend posts) and not having to constantly find new stations is a Godsend. Plus, I get to listen to any White Sox game that I want to (I no longer live in Chicago). The new radios would be perfect if they had more storage, but are a wonderful “first leap”. Their newest products should help win customers that are beyond their current market of auto customers. However, I wouldn’t invest in the stock. The losses have widened, even though they have more customers and better technology than Sirius. Now, the RIAA (which has never backed down from a fight, no matter how asinine) is suing the company. It will likely end up with a Research In Motion type settlement, but may be a long fight.

I put XM in the column of “products I love, but stocks I hate” along with Apple and Google.I love their products, but find somewhere else to invest unless you are playing with other people’s money.

Technorati Tags: XM, MP3, Napster, TiVo, RIAA, iTunes, Sirius, White Sox, Apple, Google