Last week the US District Court for the Southern District of New York published its ruling in the long-running royalty battle between US performing rights society ASCAP and AOL, RealNetworks and Yahoo. The dispute centred on ASCAP’s proposed royalty tariffs for granting blanket public performance licences to AOL, RealNetworks and Yahoo and the revenues to which the royalty rate was to be applied.  In many respects the case echoed issues in the 2007 UK Copyright Tribunal proceedings brought by AOL, RealNetworks, Yahoo and others in which royalties payable to MCPS and PRS were determined.

The court upheld ASCAP’s proposed basis for calculating revenues by reference to overall revenues with a deduction applied to take account of pages that are not reliant on music usage. The rate to be applied to the revenues was 2.5%.

The decision will disappoint AOL, RealNetworks and Yahoo. Jonathan Potter, the executive director of the Digital Media Association (‘DiMA’) which represents the online audio and video industries stated:

‘DiMA agrees that Internet portals and multi-faceted online services should pay fair royalties to songwriters and music publishers.  We are disappointed, however, that the court ruled that online services' royalties should be based in part on service-wide revenue, not simply on revenue directly attributable to music usage. 

DiMA is studying the 153-page decision, and at this point the only certainty is that the court's complex rate formula will require several weeks of additional consideration, including perhaps additional court hearings, before its impact on the parties (Yahoo!, AOL and RealNetworks) and other ASCAP licensees is known’

It is the starting point for calculating the pool of revenue to which to apply the 2.5% rate applies which will most shock the online industries. The UK Copyright Tribunal required MCPS/PRS Alliance  to show that revenue was ‘directly attributable’ to licensed music services before it was in the ‘pot’ against which any rate was applied (going as far as to set out how much licensed music content was needed on a page before revenue from advertising on that page could be included in their calculations).  The US court has started from the position that all revenue is in the ‘pot’ with the onus on the online industries to show it should not be. The content owners are thus firmly in the driving seat and in some respects the ‘burden of proof’ (as to what the rate bites on) has been reversed.