Sunday 23 August 2009

Knockback for record labels in US streaming decision

A three-judge federal appeals court has upheld a 2007 decision that a Yahoo Inc Internet radio service is not required to pay “per play” fees to the copyright holders of sound recordings. In a second defeat for the labels which brought the appeal (including Arista Records, Sony BMG, Capitol Records Inc, Motown Records Co and Virgin Records America) the U.S. Second Circuit Court of Appeals upheld the 2007 jury verdict that Yahoo’s Launchcast did not give listeners enough control to be an "interactive service" that and that Launchcast only needs pay the licensing fees set by SoundExchange, the organsiation that collects royalties on sound recordings. Launchcast lets users create personalised "radio stations" that play songs in a particular genre or match pre-determined selection such as similarity to the listeners favorite artists or songs.

The original 2001 copyright infringement claim (and subsequent appeal) is really down to one question - what constitutes an “interactive service”? This term is defined is US law as a service
"that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording ... which is selected by or on behalf of the recipient".
In his 42-page decision Judge Richard Wesley said Congress enacted the law because previous laws did not do enough to protect sound recording copyright holders from falling record sales but found that Launchcast "does not provide sufficient control" to convince listeners to choose to listen to music on the Internet, instead of buying music. The record labels had argued that the ability of listeners to skip songs they don't like made the service interactive but the court disagreed saying "The user has control over the genre of songs to be played for 5,000 songs" with Judge Wesley adding “but this degree of control is no different from a traditional radio listener expressing a preference for a country music station over a classic rock station".

Whilst the case adds some clarity to what is and isn’t currently an interactive service in the US, it does little to clarify what other services might be covered, not least as the case started in 2001 and online music has moved on in leaps and bounds since then. I suspect ultimately the line between what will replace physical sales (which can currently be most simply defined as a “download”) and what might replace broadcasting (whether it is web “broadcasting” or streaming) will become so blurred they will be impossible to separate – and with new online and on-demand business models like LastFM and Spotify sprouting up on a regular basis this could be something the courts may need to revisit soon.

Arista Records LLC et al v. Launch Media Inc, U.S. Second Circuit Court of Appeals, No. 07-2576.

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