Picture Improves for MP3.com with Pending Licensing Agreement

Widely assumed to be at death's door, streaming-audio site MP3.com may be on the rebound after reaching a preliminary agreement October 19 to license more than one million songs from the National Music Publishers' Association, Inc. (NMPA) and the organization's primary subsidiary, the Harry Fox Agency, Inc. (HFA). Individual music publishers represented by the Fox Agency must approve the agreement before it can take effect.

San Diego–based MP3.com built a massive network of subscribers through a simple service that allowed them to upload tracks from favorite CDs onto central server computers, which could then be accessed from any Internet-connected computer. In March, MPL Communications, Inc. and Peer International Corp. went after MP3.com for copyright infringement because, although the service was free, MP3.com made money from advertising that appeared on the site. MP3.com claimed it had not violated copyrights because it had not made money directly from the music.

Coinciding with the agreement reached with the NMPA, MP3.com is near the end of litigation brought against it this past spring. The case, in its final stage in a US District Court in New York, will be completed on finalization of the three-year licensing arrangement, in which MP3.com will pay as much as $30,000,000 to HFA to compensate approximately 25,000 music publishers and as many as 150,000 associated songwriters. Payments will be allocated to two equal funds: one to pay publishers for past uses of music on the My.MP3.com service, and the other for advance payments toward royalties earned under the license. MP3.com will pay a one-time fee to publishers each time a track is uploaded, and 0.25 cent each time a track is streamed to a user.

Today's math question: How many songs does MP3.com have to stream just to pay the licensing fees? The astronomical answer hasn't discouraged investors, who bid the company's stock up by 33% on the day the agreement was announced. The past year has been a roller-coaster ride for the company; in that time its stock peaked at $19.62/share and sank to a low of $2.50, a price it reached on Tuesday, October 17, two days before the agreement was announced. Astute investors who got in on that day did very well: shares of MP3.com rose to $5.50 after the announcement.

Representatives of all concerned parties breathed sighs of relief as the court case neared its conclusion. "This agreement with the NMPA and Harry Fox is a giant step for all consumers who want to simply be able to listen to music they already own legally," said Robin Richards, president and chief negotiator for MP3.com. "We believe the digital music space, through this agreement, has been thrust forward by the music publishers. All concerned should be tipping their hat to the Harry Fox Agency for stimulating and unlocking enormous value for artists, consumers, songwriters, and publishers. Today the American public won."

NMPA president Edward P. Murphy agreed: "Our negotiations with MP3.com have yielded a landmark proposal that NMPA can refer to the music-publishing and songwriting community with confidence and enthusiasm. . . . This is a triple win—for music creators, Internet music service providers, and consumers. The American music-publishing community has long viewed the Internet as presenting an enormous opportunity for growth, provided that creators and copyright holders are fairly compensated. We can now look forward to a productive and mutually beneficial relationship with MP3.com and similar services that respect the principles of copyright protection."