MUMBAI: Online music service providers AOL, Yahoo and RealNetworks must pay higher licensing fees for music broadcast over web as decided in a ruling by a US Federal court. The ruling could see them giving out around $100 million as royalties to musicians.
The case which was brought by the American Society of Composers, Authors and Publishers(ASCAP), argued that its members were not receiving a fair compensation for its work despite it being used by the online service to increase site traffic and generate revenues.The District court rejected the companies’ request to base the amount paid to the songwriters and music publishers on revenue directly attributable to music uses. Instead it said that the members of ASCAP are entitled to rate based on a formula in which gross website revenue is multiplied by the portion of website activity that is music intensive.
“The court’s finding represents a major step toward proper valuation of the music contributions of songwriters, composers, and publishers to these types of online businesses — many of which have built much of their success on the foundation of the creative works of others,” Marilyn Bergman, president and chairman of ASCAP, said in a statement.
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Under the court’s ruling the three online service providers could be forced to pay royalties to ASCAP worth 2.5 percent of their music earnings, dating back to 1 July 2002 – a figure which will be calculated by totting up the amount of music streamed and site usage. The ruling doesn’t affect the royalties paid by the companies to record companies.
The Digital Media Association, the trade group representing the three companies, said it did not dispute that Internet companies should pay fair royalties. “We are disappointed, however, that the court ruled that online services’ royalties should be based in part on service-wide revenue, not simply on revenue directly attributable to music usage,” said Executive director of DiMA Jonathan Potter, in a statement.
The companies, however were keen to point out that the ruling was little more than the first step in the process of negotiating a final figure RealNetworks’ general counsel Bob Kimball said that,”this is a long way from being over. To be clear, the court did not award $100 million in royalties.” He went on to describe the ruling as a “general and incomplete formula” and predicted a lengthy appeals process.
Content providers are seeking a bigger share of the growing streaming video and music market, which will generate $70 billion over the next six years, according to Insight Research. The number, however, could be much higher, if per-stream costs decrease faster than expected, or consumers accept Internet TV sooner than predicted.
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