RealTime IT News

Yahoo Comes Out On Top in Internet Radio Case

The Internet radio service LAUNCHcast can play on without paying licensing fees.

A federal appeals court in New York issued a ruling Friday in favor of Yahoo's (NASDAQ: YHOO) Launch Media division and its the LAUNCHcast Webcasting service, which provides individualized music streams to Web users.

In its ruling, the U.S. Second Circuit Court of Appeals said a Webcasting service cannot be classified as an "interactive service" -- a classification that would have required Yahoo to negotiate fees with the major music labels, according to a Reuters report today.

But in its ruling on the case (Arista Records LLC et al v. Launch Media), the court said a Webcasting service must instead pay only a smaller, statutory licensing fee set by the Copyright Royalty Board.

"We are pleased with the Court of Appeals' decision and we look forward to continuing to provide the best online music experiences to our users," Yahoo said in an e-mail comment sent to InternetNews.com.

A three-judge panel said the service would be required only to pay licensing fees set by SoundExchange, a nonprofit that collects royalties on sound recordings.

Reuters quoted Judge Richard Wesley, writing for the court: "There is no general right of performance in the sound recording copyright. There is only a limited right to performance of digital audio transmission with several exceptions to the copyright, including the one at issue in this case."

It's a clear win for Yahoo and LAUNCHcast, which streams music based on users' preferences for particular genres, artists or songs. But it's quite a different story the major labels, represented by plaintiffs including Sony's Arista Records, Bad Boy Records, BMG Music, Capital Records, Motown Records and Virgin Records America, among others.

Another hit for the recording industry

The news come as the major music labels are still contending with sweeping changes brought about by the Internet and the rise of digital media. For instance, the recording industry's flagging revenues over the past several years have prompted the labels to go aggressively after online piracy and explore new ways of marketing their music to a Net-enabled generation.

The industry has also sought to try to rein in services that it's viewed as cheating it out of performance royalties and other fees. Sony sued Launch Media in 2001, the same year Yahoo acquired the service, for copyright infringement, saying it failed to obtain licenses to play its songs.

At the same time, booming online music sales are coming at the expense of more traditional retail channels and physical media, further upending the industry. Apple (NASDAQ: AAPL)'s iTunes now accounts for 25 percent of all music sales in the United States, according NPD Group findings. Meanwhile, retail giant Walmart (NYSE: WMT) remains in second place in total music sales, with 14 percent of the market, but that figure includes both CDs sold in its stores and Web site, as well as digital downloads.

The LAUNCHcast victory also marks the second major development for Webcasting in recent weeks. Earlier this month, SoundExchange announced a deal with the Corporation for Public Broadcasting (CPB) that governs royalty rates for Webcasting through 2015.

Under that agreement, CPB will pay SoundExchange a total of $2.4 million for the years 2011-2015, based upon anticipated system-wide usage and centralized administration. If usage exceeds expectations, the agreement calls for additional payments to be made, which SoundExchange will distribute (along with the original lump sum) to the artists and rights owners who helped to create the music.