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Royalty fight clouds music subscriptions

Negotiations between music publishers and Net companies break down over fees for monthly plans.

Digital-music companies and music publishers have reached an impasse in royalty negotiations, clouding the future of online subscription services such as those from Yahoo, RealNetworks and Napster.

The two sides have been negotiating on and off for years over the amount of money that songwriters and music publishers should get from these subscription plans, which allow listeners to download or stream an unlimited amount of music per month.

The services have long since struck agreements with record labels, and download stores such as Apple Computer's iTunes have their royalties settled. Subscription services have been operating under a temporary agreement with the publishers since 2001, however.

"The problem is that it's been four years, and we have not had one penny distributed to songwriters or publishers," said David Israelite, chief executive officer of the National Music Publishers' Association. "The digital subscription market has been inhibited by the lack of certainty."

The latest round of negotiations between the NMPA and the Digital Media Association (DiMA), which represents large companies including Yahoo, RealNetworks and Apple, has largely broken down over price.

Music publishers and songwriters, led by the NMPA, have proposed a new kind of license for subscription services that would lump together several different types of fees paid by radio stations and download services.

This "unilicense" is necessary because subscription services use both streams and downloads, the publishers contend.

In return, the group has asked that nearly 17 percent of subscription services' gross revenues go to songwriters and publishers. That's far above what publishers and songwriters typically get for a music sale, which usually is around 5.25 percent for online radio or 8.5 percent for digital downloads.

The services say that figure is far too high, and have suggested 6.9 percent instead. Both sides have now stopped negotiating and are trading angry letters instead.

"These companies are passionately committed to paying all copyright owners fair value for their creative work, and simultaneously creating successful businesses that defeat the scourge of pirate networks," DiMA Executive Director Jon Potter wrote in a letter to the publishers groups on Friday. "This careful and expensive balancing act requires enormous investment in creative content, product development, marketing and customer service, but it cannot justify--for any executive regardless of title--paying double and triple royalties in comparison to historical industry economics."