A New York federal court agreed on a formula according to which Time Warner Inc's AOL unit, RealNetworks and Yahoo Inc may pay about $100 million in royalties to numerous songwriters and publishers.

According to the established formula, the three major online services could pay royalties to the American Society of Composers, Authors and Publishers (ASCAP). The total amount to be paid is equal to 2.5% of what they earned from music since July 1, 2002 until December 31, 2009.

ASCAP argued that its approximately 320,000 members weren’t getting their fair share for their works that helped the three online services providers increase traffic and revenue.

The formula established by Judge William Conner of the U.S. District Court for the Southern District of New York doesn’t affect the royalties owned to record companies.

According to Bob Kimball, RealNetworks’ general counsel, the formula of the federal court provides a frame work for further discussions on potential royalties.

"This is a long way from being over. To be clear, the court did not award $100 million in royalties," Kimball said.

ASCAP chairman Marilyn Bergman - an Academy Award-winning writer who has collaborated with Quincy Jones, Marvin Hamlisch and Frank Sinatra - said the writers and composers which are members of the trade group are far from being properly and fairly remunerated for their works.

The 153-page decision doesn’t include the exact amount that should be paid to the ASCAP members. However, it shows how the formula would be applied to the music royalties owed by AOL and Yahoo for 2006. According to the formula, AOL should pay 2006 fees of $5.95 million and Yahoo $6.76 million, far more than the two companies expected.  

According to the court document, the two online services providers made a counter-offer. AOL said they are prepared to pay just $632,879 in 2006 royalties and Yahoo offered $889,402 in 2006 licensing fees.

Yahoo must pay royalties dating back to 2002. RealNetworks' didn’t pay since 2004 and AOL must pay the royalties owned since 2005.

The amount of royalties per year will be established by calculating the amount of music streamed over their Internet services and the usage of their sites.

"This historic decision, for the first time, provides a clear framework for how the online use of musical works should be appropriately valued," said John LoFrumento, ASCAP's chief executive.