INTERNET RADIO… Basics of Music Copyright
By David D. Oxenford
As over-the-air broadcasters and Internet-only companies make more and more use of music on
the Internet, they need to be aware of their liabilities for music royalties. There are many
dangerous myths currently circulating that could very well get a company streaming music on
the Internet into trouble. For instance, many broadcasters believe that ASCAP and BMI royalties
cover them for all on-line music use. This is not true. ASCAP and BMI cover the broadcaster
only for the public performance rights to the underlying music composition-the song itself-when
an ASCAP or BMI song is played over-the-air and simultaneously streamed on the Internet. As
set out below, for digital transmissions-like the Internet-there is an additional royalty, payable to
a company called SoundExchange. This additional royalty compensates the performers of music.
This royalty must be paid in addition to the fees paid to ASCAP, BMI, and SESAC.
Another myth is that no royalty is due because the Sound Exchange royalties expired at the end
of 2005. While the negotiated royalties set out below did technically expire at the end of the last
year, by law, Internet radio services must continue to pay at the old rate until new rates are
established. Any payments made are subject to retroactive adjustment when the new rates are
Yet, even with these royalty obligations, the use of music on-line continues to expand.
Increasingly, consumers are looking to the Internet for the kinds of entertainment that was once
provided exclusively by over-the-air broadcasters. Music, and now video, is available on a
myriad of websites, and the availability of these services on the Internet only seems to be
growing. The future promises even more availability of this kind of content, as wireless access to
the Internet becomes more common. Soon, the digital consumer will be connected to the Internet
anywhere, anytime. Thus, the advantage of the traditional broadcaster-that its signal is
ubiquitous-will be matched by their Internet brethren.
In today's world, the broadcaster wants to go where its audience is, and that will include the
Internet. The over-the-air broadcaster can widen its reach, both geographically, and into places
where its current signal does not reach. Those steel buildings that block the signal of broadcast
stations need no longer be an obstacle to the listener who can tune into their favorite station by
going to their computer. In recent months, more and more broadcasters seem to be putting their
signals onto the Internet to be competitive to the programming that is already there.
But, in making the decision to become an Internet broadcaster, there are many legal issues that
need to be understood. This memorandum describes the issues relating to music royalties. Any
Internet radio operator needs to be aware of the rules of the road, and this memo provides a basic
overview of those rules. This memo is not meant to provide a full guide to all the legal issues that