RIAA Forms Group to Collect Web Royalties

The Recording Industry Assn. of America is forming a pool to collect royalties from Webcasters who stream music online, sources said Wednesday. But the proposed collective by the RIAA, which declined to comment on the subject, is already causing discord in the online world amid concerns the music industry’s trade group might wield too much control over royalty payments.

“I don’t think the RIAA will be unopposed. Quite a few artists and Webcasters are not comfortable with the RIAA being the administrators, collectors and distributors of Webcaster royalties,” said Jonathan Potter, executive director for the Digital Media Assn., an alliance of digital media firms ranging from Amazon.com Inc. to Spinner.com.

Sources said they expect the RIAA, which represents big record companies, such as Seagram Co.’s Universal Music, Bertelsmann’s BMG, and Time Warner’s Warner Music Group, to announce the collective on Oct. 11.

Tensions regarding the fledgling online radio business--or Webcasting as it is called--have been quietly simmering behind the scenes for months. But the debate is distinct from the RIAA’s crusade against unauthorized downloading of copyrighted music, which is at the heart of its high-profile legal battles against Napster Inc. and MP3.com Inc.

Under terms of traditional radio broadcasting, recording companies have never received royalties in the United States when songs are broadcast on the air. Rather, composers and publishers of songs get small royalties, which are collected and distributed on their behalf by ASCAP and BMI.

But under the Digital Millennium Copyright Act, copyright holders, such as record labels in this case, are entitled to royalties when a song is played or streamed online. The question of how much to pay them has been at the center of the disputes.

“The record companies and the digital broadcasters have been haggling over what the royalties will be,” said Jay Cooper, an attorney for Manatt Phelps, who represents recording artists such as Sheryl Crow.

To be sure, several Webcasters, such as Yahoo Inc., have already signed licenses with the RIAA, and many others are just assuming the RIAA will be the group distributing the royalties. But others, who have not yet set conditions with the RIAA for music performances broadcast online, have gone to arbitration to determine the terms of the license.