There was once an era where the music record industry existed in a symbiotic relationship with radio stations and broadcasters. Radio DJs could play what they wanted without paying royalties for every song played and radio play was free advertising for the record industry, enticing customers to purchase records from retailers. With the advent of the internet in the early 1990s, the record industry and their copyright holders became weary of what this new technology would do to sales, and have treated new internet radio schemes with some disdain. With continued decline in record sales (see recent Billboard #1 sales record), it seems natural for the record industry to try to tighten the reins on the copyright laws pertinent to internet radio.

A recent case, Arista Records, Inc. v. Launch Media, Inc., explores the record industry's recent attempts at expanding the scope of exclusive rights in sound recordings under US copyright law, specifically regarding "digital audio transmission" (e.g. internet webcasts). However, the US Second Circuit court of appeals has decided to maintain the scope of exclusive rights in accordance with the context in which Congress drafted the provisions within 17 U.S.C. § 114.

Yahoo-owned LAUNCH Media is known for their LAUNCHcast Internet Radio service, which enables users to create "stations" based on their selection of particular genres, songs similar to artists or songs, and other criteria. Users rate the songs from 0 to 100 to help direct the selection process. During the "webcast", users are able to pause, skip or delete songs, preview the playlist history, and click a hyperlink to purchase any of the previously played songs. Users are unable to replay current or previously played songs on the playlist.

Arista Records, along with a slew of major players in the record industry (e.g. BMG, Virgin, Sony Music, etc.) brought LAUNCH Media to court, claiming that LAUNCHcast was in violation of 17 U.S.C. § 114. The record industry argued that LAUNCHcast was an "interactive service" and should be paying individual licensing fees to copyright holders for each song that has been played for users. However, the Second Circuit judges affirmed a lower court decision and found LAUNCHcast to be a "non-interactive service", which requires only a general statutory fee set by the Copyright Royalty Board.

"Interactive service" is defined under 17 U.S.C. § 114 (j) (7) as "one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient" [emphasis added].  Thus, if a webcast allows the user to (1) on request, and subsequently have played, a particular sound recording; and/or (2) receive a transmission of a program "specially created" for the user, the webcast would fall under an "interactive service".

LAUNCHcast was found to fail in the first regard, as users do not have sufficient control over the service to be able to request a song and immediately have it played. LAUNCHcast randomly selects 50 songs from a pool of approximately 10,000 songs based on user preferences. However, approximately 60 per cent of the songs available in the pool are generated by factors outside the user's control. Due to the random generation of the playlist, the user is not aware of the pool of songs in advance. This makes LAUNCHcast's programming akin to choosing a traditional country music station over a classic rock station.

With regards to the definition of "specially created", the Judges take note that Congress has made clear that the provision was enacted to prevent webcast users from solely using webcast services for music, in lieu of purchasing the records, and ultimately to protect copyright holders from losing record sales. Thus, if the user has sufficient control over the service such that the playlist is so predictable that it is to the same effect as owning the music and being able to play it at will, such a service would be considered to be "specially created" for the recipient. In this regard, the lack of control for LAUNCHcast users would not foreseeably cause users to abandon record purchases, nor would it be considered "specially created" for the users.

It is interesting to note that Congress has specifically entrenched both "specially created" and "on request" to account for two distinct moments of operation. While the Judges have recognized the dichotomy, their reasoning given for each seem to spawn from the same point: whether the user is able to direct the webcast service in providing the exact song or set of songs that they want. Although it can be clearly seen that LAUNCHcast users lack the control of specificity in the songs they are able to play, the attempts by the Judges to bring clarity to "interactive services" seem to still leave the nuances outlined by Congress in a bit of a haze.