May 1, 2008 9:35 AM PDT

Court: Online services must pay up for song use

Posted by Caroline McCarthy

A federal district court in New York ruled Wednesday that the American Society of Composers, Authors and Publishers is owed "reasonable license fees" by online media powerhouses AOL, RealNetworks, and Yahoo for the music streamed and distributed on their sites.

Currently, music streamed by sites owned by the three companies is advertising-supported and no dividends are paid to ASCAP.

The U.S. District Court for the Southern District of New York will now determine appropriate fees for AOL, RealNetworks, and Yahoo, all of which have applied for ASCAP licenses but have not been able to agree upon fees. The total payments to the group, which represents over 320,000 songwriters, composers, and music publishers--not record labels--could reach $100 million. (Click here for a PDF of the court's decision.)

The license fees would cover music distributed as early as July 1, 2002, and then up through the end of 2009. Because songwriters and composers often aren't affiliated with record labels that distribute their music as performed by another artist, they presently are left without licensing fees from digital distribution on the three companies named in the court decision.

ASCAP President Marilyn Bergman wrote in a statement following the decision:

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.
It is critical that these organizations share a reasonable portion of their sizable revenues with those of us whose content attracts audiences and, ultimately, helps to make their businesses viable. This decision will go a long way toward protecting the ability of songwriters and composers to be compensated fairly as the use of musical works online continues to grow."

More details to follow.