Music Labels, Publishers to Announce Online Deal

By | October 8, 2001 at 12:00 AM

Music publishers and recording companies are expected early this week to announce a deal for licensing of music online, removing a hurdle that threatened to thwart industry plans to launch Web services, sources close to the talks said on Sunday.

Under the deal, which is expected to be announced as early as Tuesday, the major labels would pay music publishers, who own the copyrights to underlying compositions, a $1 million advance to cover the use of their music over the next two years, said a source familiar with the matter.

The publishers’ effort has been led by the National Music Publishers’ Association and its Harry Fox Agency licensing arm, while the Recording Industry Association of America (RIAA) negotiated on behalf of the major labels.

Officials from both sides were unavailable or declined to comment.

The deal removes a major obstacle for two initiatives known as MusicNet, comprised of RealNetworks, AOL Time Warner Inc’s Warner Music, EMI Group Plc and Bertelsmann AG’s BMG and Pressplay, owned jointly by Vivendi Universal’s Universal Music and Sony Music.

Both services hope to launch within the next two months, but had faced a serious challenge by publishers regarding rates for songs provided in interactive Internet music services. Without such an agreement, the new services would have likely faced copyright lawsuits by the publishers.

The dispute had divided recording companies, who own the rights to sound recordings, and the publishers – many of which are owned by the same parent companies.

Late last month, renegade song-swap company Napster agreed to pay $26 million to publishers to settle damages for past, unauthorized uses of music and also an advance of $10 million against future licensing royalties for music used on a new secure, fee-charging service it hopes to launch this year.

While the deal cleared some of Napster’s legal burdens, it still faces potentially billions of dollars in damages from a copyright lawsuit from the recording companies.

Nevertheless, many industry officials believed that deal foreshadowed publishing deals for MusicNet and Pressplay, which are moving aggressively to launch their services to tap the large audience for online music demonstrated by Napster.

Napster, the once phenomenally popular songs-swap service, has been idle since July due to a recording industry copyright lawsuit.

Furthermore industry observers note that while the deal between recording giants and publishers helps resolve some hurdles, many top artists may still seek to block use of their music on these services.

For instance, EMI senior vice president Jay Samit, said the music of the Beatles will not be available on any of the subscription services the company has partnered with. Last week, EMI became the first major label to license its music to both Pressplay and MusicNet.

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