Yahoo’s LAUNCHcast Wins Webcast Fee Ruling

(CN) - Yahoo's LAUNCHcast online radio service isn't "interactive" enough to warrant broader licensing fees, the 2nd Circuit ruled. In the court's first ruling on the issue, it upheld a jury's verdict that the webcaster doesn't have to negotiate licensing deals with record labels for each song it plays.

The New York-based appeals court had to decide if LAUNCHcast meets the definition of an "interactive service" under federal law. If so, the webcasting service would have to pay licensing fees to copyright holders for each song it played. If not, LAUNCHcast would simply pay a licensing fee set by the Copyright Royalty Board.

The court affirmed the jury's determination that LAUNCHcast is not an interactive service.

LAUNCHcast lets users create streaming "stations" based on their music preferences.

The law defines an interactive service as one that caters to an individual user. But a digital transmission created for the general public, such as a traditional radio station, is not considered interactive and need only pay the statutory licensing fee.

Fearing that webcasters would cut into their sales, major record labels like BMG Music and Arista Records called on the courts to force LAUNCHcast to get individual licenses in order to play their songs.

"BMG argues that any service that reflects user input is specially created for and by the user and therefore qualifies as an interactive service," Judge Wesley wrote. "But we should not read the statute so broadly."

The court looked to the context in which Congress first used the phrase "specially created" in copyright legislation to determine that LAUNCHcast isn't interactive.

Wesley noted that the laws were primarily passed to protect record companies from lagging record sales. Because LAUNCHcast doesn't offer predictable user-molded playlists, the judges explained, users aren't likely to choose the webcast over the album.

The only thing a LAUNCHcast user can control with any certainty is the ability to block a song by giving it a "zero" rating. But the ability to avoid a song doesn't entitle record companies to royalties, the court said.

The panel emphasized that interactivity requires predictability.

"LAUNCHcast listeners do not even enjoy the limited predictability that once graced the AM airwaves on weekends in America when 'special requests' represented love-struck adolescents' attempts to communicate their feelings to 'that special friend,'" Wesley wrote. "Therefore, we cannot say LAUNCHcast falls within the scope of the DCMA's definition of an interactive service created for individual users."

Now powered by CBS Radio, LAUNCHcast no longer offers webcasts based on user preferences, but Yahoo is reportedly working to resurrect that feature.

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