Royalty Groups Pressing Online Stores For Performance Fees On 30-Second Samples, Downloads

Posted by on September 17, 2009

From the douchery files: music royalty groups ASCAP and BMI are pressing iTunes and other online music stores to pay performance fees on 30-second song previews available when shopping for music, as well as individual downloads of songs and TV shows and movies featuring their artists’ music.

Yes, this is insane, and it’s ASCAP and BMI desperately trying to share someone else’s piece of the pie. Performance royalty groups have no direct financial interest in music sales, as their business only pertains to when music is performed in public – on the radio, at restaurants, sports stadiums, etc. These groups collect fees and pass it on to composers and songwriters. This is different than when music is sold at retail, when “mechanical” royalties are paid to labels who then distribute the revenue.

So, ASCAP and BMI are arguing that a download is the same as a radio play and therefore a public performance fee should be paid in addition to the standing distribution agreements. However the Digital Music Association, an online media industry defender that counts Apple, RealNetworks and others among its members, counter that legal precedent has already been set that considers downloads private and therefore exempt from performance fees. ASCAP has appealed this decision and the case will be heard later this year.

The really silly (and what will be very controversial) bit is the issue over 30-second samples. iTunes has acquired licenses allowing previews without paying for them, but the groups are trying to change. From a legal standpoint, it can be argued that streaming 30 seconds is no different than streaming an entire song from a site like Pandora (which does have to pay performance royalties).

None of this really affects the consumer unless (or rather, until) the cost of additional royalty fees is passed on in the form of higher prices. This is really more just different factions of the music industry fighting to get a taste of the action. Performance royalty groups see that Apple is the only place still making money off music, and they want to force their way in. It’s highly unlikely the downloads-as-public-performances thing will fly, it’s simply a modern day purchase method – downloading a song from iTunes is the same act as unwrapping a CD you’ve just purchased. But the streaming previews issue could get hairy, and it’s something we’ll keep an eye on. Of course if ASCAP and BMI get their way, iTunes will likely just stop using previews before they pay another dime.

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