Hi,
It is legal if you have permission.
I have been in the music business for many years and I can tell you most people really do not know what the law states. There are a lot of urban legends out there.
I applaude you for wanting to do it right (even if its to avoid a lawsuit from RIAA), and not defrauding those who work hard to create entertainment works for us. :appl:
"promotional use only" is misunderstood. There is not a "fair use" as most people understand it, and it does not matter whether you are charging or not. You must get WRITTEN permission and usually pay for copyrighted materials.
There are such a thing as statutory compulsary licenses, that you can get from an aggregate organization such as BMI who is a Performance Rights organization.
It all comes down to how you plan to house and distribute it (regadless of if it is for sale or not)
when it comes to copyrights on the internet you are dealing with several different issues.
It is a lot easier to get permission for people to listen to music via a stream (like my internet radio station
www.hotcityradio.com) than to download.
I am speaking strictly US copyright law here.
There are MULTIPLE copyright holders in a song -- primarily the sound recording (which is owned by the record label) and the underlying works, which is they lyrics (songwriter) and musical arrangement (producer) these are usually owned by one or more publishers.
FOR EACH song, you would need to get permission from all copyright holders. So contact the labels and publishers.
Now your problem occurs with the fact it is on demand (as for the new media department) and the fact that its in a fixed format which incurs mechanical royalties. You have to then get reproduction rights from owner of the sound recording (label)
There are other things that come into play depending on what you are doing exactly like syncronization and performance rights
This is just a brief overview, but know that you will need an attorney that specializes in music business to fully protect yourself.
Be sure to Look up:
Music Clearance Agencies
in your favorite search engine.
For the record the artist rarely, if ever has any control over the song, they are performers and usually are not compensated unless they have actually written the song (which most do not)
Artists could not legally (because of the contracts they sign for recording and publishing) put "their own" music out like that, as they do not own it.
be sure to get familiar with the The Digital Millennium Copyright Act of 1998 (DMCA)
www.copyright.gov/legislation/dmca.pdf
Resources that you will find helpful:
www.copyright.gov www.ascap.com www.bmi.com www.harryfox.com www.sesac.com www.soundexchange.com www.riaa.com www.grammy.com
best wishes on your project! :)