The decision, which puts radio stations on the same legal footing as Webcasters that limit their programming only to the Internet, could keep much of the radio programming that people have listened to online on hold.
Many radio stations have already pulled the plug on their online broadcasts, citing both the possibility of having to pay royalties for their music and a dispute over royalties owed to actors in radio commercials. Broadcasters said Thursday they would look into other options after the ruling, raising the likelihood of an appeal.
"Broadcasters, record companies and consumers have long enjoyed a symbiotic relationship whereby airplay on radio stations benefits all parties, along with generating enormous revenues for the record labels," Edward Pritts, CEO of the National Association of Broadcasters, said in a statement. "We're disappointed that this unique relationship will be disrupted by the court ruling."
New fees to the record companies would be "unfair and unreasonable," Pritts added, noting that the NAB is "reviewing its options."
The tussle over payments for online radio is happening on several fronts. An arbitration panel is currently hearing testimony from the record industry, from artists, from Webcasters and broadcasters, heading toward a decision that will set the rates for royalty payments next year.
At stake are not only fees for future broadcasts, but back payments stretching back to late 1998. As part of the Digital Millennium Copyright Act of that year, Webcasters were granted the rights to use music without direct permission under a so-called statutory license. No fees were immediately set, but under the terms of the law, Webcasters would have to pay retroactive royalties once the payment terms were decided.
That means that radio stations that have streamed their services online could be in for a sizable bill once the U.S. Copyright Office finally settles on a rate.
Many radio stations now remain offline after going silent earlier this year. Those associated with giant Clear Channel Communications have issued an apology in place of the music stream itself, citing "issues regarding demands for additional fees for the streaming of recorded music and radio commercials."
The Recording Industry Association of America welcomed the court ruling and said it would start working with the broadcaster.
"We are pleased that the court upheld the rights of artists and record companies," Hilary Rosen, RIAA's chief executive, said in a statement. "We now look forward to working with the broadcasters for a smooth transition into this marketplace."