A Second Circuit Court of Appeals handed down mixed results for Internet music providers today in a ruling in New York. The appeals panel rejected claims by the royalty group ASCAP that downloads were live performances and said that transfers alone didn't amount to a public airing. Terms in the Copyright Act made it clear that a performance involved actual playback or a live show, none of which was guaranteed.
"Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener," the ruling read.
Rhapsody and Yahoo, the two Internet services involved in the appeal, nonetheless faced a setback as the court also turned down a decision in favor of bulk licensing. They had obtained a 2.5 percent royalty rate for their entire music collections through a 2007 decision but will now have to face reexamination of those terms. The rate, which was based on revenues modified by the relative use of the service, couldn't be demonstrated as a reasonable gauge of how much value there was, the panel explained.
Streaming, subscription-based services such as Rhapsody have often fought to keep royalties low as the nature of the business allows for national and international listening that can reach much wider audiences than traditional radio. Pandora and others have lately blocked off access outside of US as the royalty charges are reportedly unsustainable.
The decision nonetheless may put at least a temporary end to disputes with ASCAP over licensing terms. It has tried to contend that even song samples constitute live performances and has asked for royalties on both these and full tracks. Such arguments may have kept Apple from offering longer iTunes samples as the extension may have been an opportunity to negotiate extra royalties.
Critics have accused ASCAP of trying to "double dip," since many of the artists are already being paid for the downloads like they would a traditional CD or vinyl purchase, neither of which is subject to a live performance fee.