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I've checked on my own streams(mostly because of different Steam skins that doesn't show the broadcast interface in the Steam overlay so I can see the chat and whatnot), and it transmits all the sounds that you hear, which includes game sound(if you have that), microphone(if it's enabled), and everythin' else that you can hear comin' from your computer sound output.
Who takes liability for this? Have Valve made any sort of statement regarding this? If not then they're going to have to address it soon..
You definitely can NOT broadcast music without explicit permission from the publisher.
Given that we can't control what audio streams are sent to our broadcast then I'm sure Valve have put a lot of people into murky legal waters and these people are probably mostly unaware of the situation.
Most likely. Not to mention that the FAQ of broadcasting says that the thin's that -can never- be broadcasted is movies, discussion of piracy(as well as cheats, hacks etc.), racism, obvious stuff, however music is not mentioned, no matter if it's within the Steam music player or not. It would be great if Valve could clarify this to everyone clearly so there won't be any unecessary copyright claims and whatnot. Or at least make all the audio broadcasted be from the microphone connected, as well as the game broadcasted at hand.
Otherwise you couldn't stream music games like Beat Hazard or Audiosurf.
Both use custom music the user plays.
There are also many games that also let you play your own music through them as well.
And since there is no recording of stream (as of now), they probably aren't going to do much about custom music.
How can you put music in your game?
Like I said, any outer audio "Other Tabs" Will not be heard. But if you were to put it in the game then yes!
Hope This Helped.
Thanks for posting this though in case others needed to know!