Associated Press, May 1, 2008

A federal court on Wednesday established a formula for determining the Internet royalties owed to thousands of music composers, writers and publishers by three major online services - Yahoo Inc., AOL and RealNetworks Inc.

The American Society of Composers, Authors and Publishers hailed the decision, estimating the guidelines could yield as much as $100 million in payments covering a seven-year period ending in 2009.

The trade group, known as ASCAP, had contended that its 320,000 members weren't being properly compensated for musical works that helped drive traffic and increase revenue for Yahoo, Time Warner Inc.'s AOL and RealNetworks.

Wednesday's ruling, issued by a federal judge in New York, doesn't affect the royalties owed to record companies.

A representative for the Digital Media Association, a trade group representing the Internet services, declined to comment on the ruling late Wednesday.

U.S. District Judge William Conner's 153-page decision didn't specify the total amount owed to the ASCAP members, but he provided an example on how the formula would apply to the music royalties owed by AOL and Yahoo for 2006. Under the formula endorsed by Conner, AOL owed 2006 fees of $5.95 million and Yahoo owed $6.76 million.

That's far more than AOL and Yahoo envisioned. New York-based AOL had proposed paying just $632,879 in 2006 royalties while Sunnyvale-based Yahoo had proposed paying $889,402 in 2006 licensing fees, according to court documents.

Conner's 2006 estimates were slightly less than what ASCAP had sought from the Internet services. The group wanted $7.83 million from AOL and $7.38 million from Yahoo to cover the 2006 royalties, according to court documents.

Yahoo must pay royalties dating back to 2002 while AOL must cover fees going back to 2005. RealNetworks' unpaid bill goes back to 2004. The amount for each year will vary widely, depending on the amount of music streamed over their Internet services and the usage of their sites.

The new formula will also be used to determine the online royalties owed by all three companies 2007 through 2009.

"This historic decision, for the first time, provides a clear framework for how the online use of musical works should be appropriately valued," said John LoFrumento, ASCAP's chief executive.

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