A truce between music publishers and webcasters, initially agreed upon in order to allow online music services to develop, is over.
As representatives of music composers, publishers and songwriters prepare to square off in Washington to determine a mechanical royalty rate for interactive webcasts and ringtones, a federal judge established a formula for back payments to certain publishers by three large webcasters: Yahoo, AOL and Real.
This is a separate issue from the label vs. webcaster squabbling we covered last year, which concerns the sound recording rights that are owned by labels and recording artists. At issue here are composition rights, owned by songwriters, composers and the publishers who represent them.
After the webcasters and ASCAP failed to reach an agreement, their dispute reached the proceeding stage in which a judge sets the rates. The American Society of Composers, Authors and Publishers (ASCAP) asked the judge for $7.83 million from AOL and $7.38 million from Yahoo for 2006 webcasts alone. The judge's formula for the rates granted it nearly that much – $5.95 million from AOL and $6.76 million from Yahoo. Each had recommended to the judge that it pay under $1 million. (Real's debt is as-yet undetermined, because "the record does not contain sufficient data to permit the Court to apply the formula.")
The formula appears to give 2.5 percent of the webcasters' music-related revenue to music publishers. In determining the formula, the judge looked at what Real and MusicNet have been paying ASCAP competitor BMI for on-demand streams, the percentage terrestrial radio stations pay to ASCAP, the mix of interactive/non-interactive features in the services and other factors.
Here's the legalese translated into a mathematical expression:
(Total revenue of business unit - ad sales commissions - traffic acquisition costs) x (total hours of ASCAP music streamed to users / total hours of general use on the website) x 0.025
All in all, webcasters could end up owing ASCAP as much as $100
million for the seven years ending in 2009. A source close to the situation doubted whether the formula would really result in a payout that large, although it will certainly be a large amount.
"The Court's finding represents a major step toward proper valuation ofthe music contributions of songwriters, composers and publishers tothese types of online businesses – many of which have built much oftheir success on the foundation of the creative works of others," said
Marilyn Bergman, president of ASCAP. "It is critical that theseorganizations share a reasonable portion of their sizable revenues withthose of us whose content attracts audiences and, ultimately, helps tomake their businesses viable. This decision will go a long way towardprotecting the ability of songwriters and composers to be compensatedfairly as the use of musical works online continues to grow."
ASCAP recently e-mailed a "bill of rights for songwriters and composers"
to its members, indicating the extent to which it is willing to takeoff the gloves and battle for publishers' piece of the online radiopie. So far, it has 5,251 signatures (ASCAP counts approximately 320K
members amongst its ranks).
There are many pipers to be paid.
153-page PDF of the court's finding
(Associated Press; Photo of Jackson Browne signing ASCAP's "bill of rights": ASCAP)
