Streaming Audio Goes Legit

Will the official online music gates finally stream open and flood us with non-pirated tunes? Perhaps. One important step in the process has finally been taken. The National Music Publishers' Association (NMPA), the Harry Fox Agency (HFA), and the Recording Industry Association of America (RIAA) announced last week that they have come to a "breakthrough" agreement on the licensing of musical works for new subscription services on the Internet.

The groups were in a deadlock for months, trying to negotiate the online publishing rights for streaming music. The NMPA's Edward P. Murphy comments, "This landmark agreement confirms that the streaming of music on demand requires a mechanical license under the US Copyright Act. We are pleased to have reached a consensus with the record industry on this key issue, enabling us to move forward on the matter of determining what the royalty rate for such streaming will be."

Under the agreement, the RIAA and all its member labels and their licensees, including new on-line subscription services, will immediately have access to every musical work authorized to be licensed by HFA, the largest agency in the industry for licensing reproductions and distributions of musical works. HFA says it will now issue licenses for subscription services offering on-demand streaming and limited downloads (ie downloads that can be played only for a limited period of time or number of times).

The agreement also provides for an expedited licensing process, allowing for "bulk licensing" of musical works. The groups say the agreement also confirms the parties' mutual understanding of the relevant copyright law—namely, that a mechanical license is required for these types of subscription services, that the compulsory licensing provisions apply to such services, and that the license covers the server copy as well as transient and buffer copies.

Once rates are determined, the groups say, royalties will be payable on a retroactive basis from the commencement of services. Pending that determination, the RIAA says it will pay HFA an advance of $1 million toward the royalties to be determined. If the two sides do not settle on a rate during the next two years, the recording industry says it will pay monthly advances totaling $750,000 per year until a rate is set.

To protect individual rights holders, the agreement also states that publishers represented by HFA will have the opportunity to opt out of the licensing agreement if they so elect. Likewise, the group says that any subscription service or record company may deal directly with HFA or individual music publishers, if they prefer.

The NMPA's Irwin Z. Robinson says, "This is good news for songwriters and music publishers who want to promote this exciting new outlet for their music and for the Internet companies poised to make it happen." The RIAA's Cary Sherman adds, "This agreement will do wonders for music lovers and the on-line music marketplace. It confirms that the existing compulsory licensing system is available for new subscription service business models; that the mechanical license covers everything from the server copy through to the user's PC; and that the licensing process can be quick, simple, and efficient."