A few friends and I are looking at starting a sideline business selling mp3 versions of various creative commons works (can't get into too many more details). We've done the legwork on the legal side to make sure that we can sell the content legitimately. However, one friend brought up something that I had never heard which was that you actually have to pay a licensing fee (2% of revenue) just to sell mp3 files (details here: http://mp3licensing.com/royalty ).
This seems like a bit of a scam but obviously if it's legit we don't want to get into legal issues down the road. I checked their list of licensed companies and while many big names are on it (e.g., Apple, eMusic, etc.) a number of others (e.g., CD Baby, Pandora, etc.) are not.
Can anyone offer additional insight here?
Pandora allows you to buy through Amazon or iTunes, rather than selling directly.
Wikipedia can tell you more about why MP3 Licensing is an issue, as well as what some of the alternatives are. AAC is an extremely popular format thanks to its use on almost every Apple platform, but most of the geeks who are really into this stuff are pushing for wider support of Ogg Vorbis, a patent-free audio codec.
Depending on how your customers will be consuming the files you sell them, either AAC or Ogg may be a viable alternative.
On the other hand, 2% is a pittance most companies are willing to pay for the near-universal platform support for MP3. (But, keep in mind: you vote with your money.)
Edited to respond to comment: I'd like to help you Tommy, I guess I just don't find your question as clear anymore.
If you're asking, "Are MP3-streaming sites subject to licensing fees?", then according to the patent-holders, they are.
If you're asking, "Does Pandora pay these fees?", I'd assume so. My understanding is that they primarily stream AAC-encoded music at this point, but for the content that is MP3-encoded, I'm sure they're above board.
If you're asking, "Why is Pandora not on MP3Licensing.com's list?", I'd say you'd have to ask them. :-) Pandora may be part of a larger association that jointly pays fees, they may be on the list under the name of a different legal entity, or MP3Licensing.com's list may simply not be complete.
If you're asking, "Why is there not more discussion on this issue?", I'd say it's very, very complicated. Some of the factors are:
Thomson is the licensing company for mp3 so you do have the correct site. AAC is licensed by: www.vialicensing.com. You cannot hope to create a legitimate business using either one of these codecs without having an agreement from one of them, at least until the patents run out. At the least have a conversation with them on what type of license you need, streaming, encoder or decoder or a combination.
You may then have to track down a source code licensor unless you are an audio expert and can code from a reference doc/code base. Companies using these codecs have either bought a codebase from a developer or spent a lot of time developing and optimizing the code to get the best audio quality for the performance. These licensors should also have a current list of the developers.