Netcaster’s Deal May Set Trend in Music Royalties

Online radio company WWW.com in Irvine struck a licensing agreement Wednesday with the Recording Industry Assn. of America to pay royalties to major-label artists whose works are broadcast on the Web.

The deal could help set a possible standard for online music broadcasters, which have been embroiled in a contentious fight with the RIAA over who will profit from music streamed over the Internet.

The Washington-based trade group, which represents record labels, has been trying to collect music royalties for the past year from hundreds of Web broadcasters under the Digital Millennium Copyright Act of 1998.

Analysts say the agreement could give the RIAA a boost in its effort to establish an industry standard because WWW.com is one of the largest online broadcasters. The recording group could point to the agreement as evidence of both an industry willingness to pay the royalty as well as what a fair market price should be.

The terms of the WWW.com deal were not disclosed.

“We signed this deal because we wanted to comply with the law,” said Scott Purcell, chief executive of WWW.com.

Founded a year ago, WWW.com broadcasts original programming of 300,000 songs on more than 200 of its Internet-only music stations. The company, which has a staff of 85 and a large studio facility in Santa Monica, makes its money from advertising and licensing its broadcasts to other Web sites.

The recording industry group has been in talks with other Web broadcasters but to date has signed only a few royalty deals, said Steven Marks, senior vice president of business affairs for the RIAA.

“We’re in negotiations with a lot of people right now,” he said. “If those negotiations don’t succeed, we will be proceed to arbitration.”

Some of the 41 members of the Digital Media Assn., a group that represents some of the biggest online audio and video companies, including MTV and America Online-owned Spinner.com, are preparing for arbitration with the RIAA over this issue, officials said.

The 1998 digital copyright law affects Internet-based radio stations but not their conventional over-the-air counterparts.

Radio stations pay an annual fee to music publishers--Broadcast Music Inc. and the American Society of Composers, Authors and Publishers--for the right to play songs over the airwaves.

But because of the way federal copyright laws are written, these same stations do not have to pay an additional fee to the RIAA, which protects the copyrights of a sound recording.

Critics say that forcing online players to pay this latter royalty in addition to licensing fees is unfair and that the industry is “double-dipping” in its pursuit of profits from music over the Internet.

Recent lawsuits have highlighted the tension between the entertainment industry, which is struggling to protect its profits in the Internet age, and online companies determined to push the boundaries of the digital media market.

Last year the RIAA filed suit against MP3-trading company Napster, accusing the firm of building a haven for music piracy.

And earlier this year the RIAA filed suit against MP3.com Inc., alleging copyright violations arising from its My.MP3.com service, which allows consumers to access digital copies of their CDs over the Net. Soon after, MP3.com filed a countersuit accusing the trade group and its chief executive, Hilary Rosen, of unfair business practices.