Songwriters could be as much as $100m better off after a court ruled they should be paid more money for online performances of their music.
A New York rate court determined what the foot-dragging license holders could afford to pay: Yahoo! has 18.7 per cent and AOL 9.1 per cent share of internet advertising revenue, worth around $5.56bn last year.
AOL, Yahoo! and Real were granted blanket licences by the member-owned American composers society ASCAP, but had failed to negotiate a rate successfully. The court heard evidence last autumn, and released its findings last night.
Yahoo! had reached an agreement with the four biggest RIAA members - but stalled when it came to paying the composers and songwriters.
ASCAP says its proposal is conservative: it couldn't calculate the value of background music, for example, or user generated content at AOL, because the company failed to provide figures. AOL also failed to supply Shoutcast listener hours.
"Because the benefits of a blanket licence exceed the value of the right to perform the music in the repertory, the blanket licence fee must reflect these extra benefits," the court observed.
The rate court concluded that ASCAP's revenue-based formula was reasonable but the fee rate was not. However, it noted that without music, many of these services would not exist: for example, Rhapsody and Music Choice.
It also noted that the revenues of Yahoo! and AOL were not too different to the revenues from the three major TV networks. And it agreed with ASCAP that the suggestion was conservative, and that many uses of music by the licencees was not calculated.
The court also noted tricks the services used to reduce their payments to songwriters: such as moving paid ads from the music player to a web page behind the player.
The three internet companies were ordered to pay 2.5 per cent of revenue minus traffic acquisition costs and other expenses, backdated to 2002.
ASCAP represents 295,000 members. ®