Yahoo Prevails In Ruling Over Webcasting Fees

Yahoo delivered quite the copyright knockout punch Friday to the record labels; a legal outcome that will have a very big impact on the online music industry.

A federal appeals court in New York ruled that a Yahoo Inc Internet radio service (Launchcast) doesn’t have to pay broader licensing fees to record labels for its content. The recording industry wanted Launchcast to pay royalty fees on every track they broadcast, which equals big dollars.

In a case that had the music ‘biz paying close attention, the U.S. Second Circuit Court of Appeals upheld a 2007 jury verdict that Yahoo’s Launchcast webcasting service did not give listeners enough control to be an “interactive service” that would require the fees.

And with that, no need for Internet radio services that don’t let users play tracks on demand to draw up any content licensing deals with record labels.

That equals a big win for music fans and big defeat for the labels under the Sony Music Entertainment banner, plus Capitol Records, Motown Records, Virgin Records, Arista Records and Bad Boy Records, who were also plaintiffs involved in the case.

The three-judge panel said the service is required only to pay licensing fees set by SoundExchange, a nonprofit that collects royalties on sound recordings. It was the first federal appeals court to decide the issue.

“It’s an immediate loss for the recording industry,” said Rey Sanchez, chairman of the department of music, media and industry at the University of Miami and a voting member of the National Academy of Recording Arts and Sciences.

“If the service had been deemed interactive, Yahoo would have to negotiate fees with every record label to use their songs. Instead, it only has to pay licensing fees.”

Yes, it was not a good day if you were a record producer; the Yahoo court win only further underscores the slow sales hurting the record ‘biz and continued push by online services where consumers are buying and listening to music.

According to the Wall Street Journal, in the panel’s decision, U.S. Circuit Judge Richard C. Wesley noted the level of predictability and of an individual user’s control over the songs played are key factors in determining whether similar Webcasts are interactive listening services as defined by Congress.

“Indeed, the unique nature of the playlist helps Launch ensure that it does not provide a service so specially created for the user that the user ceases to purchase music,” Mr. Wesley wrote.

“Launchcast listeners do not even enjoy the limited predictability that once graced the AM airwaves on weekends in America when ‘special requests’ represented love-struck adolescents’ attempts to communicate their feelings to ‘that special friend’.”

The ruling is “excellent news” for independent record labels, said Rich Bengloff, president of the American Association of Independent Music.

“It gives us a much larger platform, we believe,” he said.

It was a big day for Internet radio stations; popular destinations like Slacker, Last.fm and Pandora have to be feeling pretty good; this is an issue that has gone on for a long time now (with plenty of litigation) and Friday’s ruling adds some much needed clarity.

Not everyone will be in agreement with the court’s decision, but it certainly feels like a just outcome.

Source: Wall Street Journal