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censers have free rein to set and raise fees. They hold the threat of a lawsuit over you're head until you pay, and the only place to challenge their invoice is in a single New York courtroom. Unless you have the money to hire lawyers and fly to New York, you're forced to pay what they say and keep your mouth shut.
H.R. 789 would stop this practice. It sets up a fair third-party arbitration system whereby a business could settle any contract dispute in their own State without having to hire lawyers and fly all the way to New York City.
Last October I and some colleagues in New Hampshire met with some representatives of ASCAP and BMI in our State capital, Concord. We discussed our differences of opinion, but could not work out any mutual acceptable solution. As a result, I believe H.R. 789 is a necessary step in the right direction. That's why I wrote a letter to my local newspaper explaining why Congressman Zeliff is right to support this bill. Guess what happened on January 31, of this year? An ASCAP representative arrived at my place of business to audit my books to see if more money was due to them. Yes their contract with us, which essentially demanded on a “take it or leave it” basis gives them the right to audit my books just like the IRS. The audit produced additional fees of $911 plus interest of $693 figured at 172 percent monthly or 18 percent per year.
From day one, ASCAP and BMI have misrepresented this legislation. It's silly to suggest that this bill will stifle the next generation of songwriters, hardly. Songwriters and licensing societies will still be compensated handsomely from broadcast networks, cable satellite systems, and from businesses like mine, that provide entertainment through live and taped music.
It's clear that ASCAP and BMI need to be reined in here. State governments have already started recognizing this in limited ways. In the past year alone, at least 16 States have passed laws cracking down on some of the business practices of these groups. Now it's Congress' turn to address the larger picture. I ask you to move forward on H.R. 789, and I thank you very much for your consideration.
[Mr. Barba's statement may be found in the appendix.]
Chair MEYERS. Thank you, Mr. Barba. Our next witness is Mr. Alger, and he is a Songwriter from Nashville, and a member the American Society of Composers, Authors, and Publishers, ASCAP.
TESTIMONY OF PAT ALGER, AMERICAN SOCIETY OF
COMPOSERS, AUTHORS AND PUBLISHERS (ASCAP) Mr. ALGER. Thank you. As you said, I am from Nashville, Tennessee. I have been a member of ASCAP for my entire career. I am also President of the Nashville Songwriters Association International. I've written a lot of songs, some of them you might be familiar with like “The Thunder Rolls” and “Unanswered Prayers” for Garth Brooks, “Small Town Saturday Night” for Hal Ketchum, and quite a few others I'm happy to say.
It is fitting that I testify before the Small Business Committee because I'm about the smallest businessman you'll find. Songwriting is my profession, and it's my livelihood. What I have to say would apply to almost any songwriter from the most successful, to
the young dreamers out there who are trying to write their first hit.
I say I am a very small businessman because I have no one other than my co-writers to help me earn my living. I don't have a staff and I don't have a secretary. I don't have a factory. If I'm not able to go to work on a particular day, there isn't anybody to substitute for me. The intangible product that I make comes solely from my mind. For me to be successful with a song, or intellectual property, I have to leap some pretty enormous hurdles.
In the beginning of their career, songwriters must find outside work to support themselves while they train for the music professor. After they've worked their magic and put words and notes together, they've got to find a publisher to publish it; and you've got to find an artist to record it or perform it. Then, they've got to hope and pray that radio is going to broadcast it.
When my songs are successful and businesses use them to enhance their appeal to the public, and make money from them. When my songs are used in the restaurant in Ohio or hotel in New Hampshire, it is because they think that music will help their businesses by attracting and entertaining new customers. Oliver Wendell Holmes said this many years ago that, “If music did not pay, it would be given up.”
Payment for use of my musical property is what enables me to stay in business, and I think payment for music property is a pretty key element to our country's economic system.
There's no way that the new songwriter can individually know what businesses are using his music. There's no way that he can individually collect from these businesses even if he knows who was using it. There's also no way I can deal on a level playing field with powerful businesses like chain restaurants and broadcasters. That's why songwriters, together with their publishers, formed ASCAP in 1914. ASCAP and similar organizations, BMI and SESAC, find the users of our music and license them at a fair fee.
As Mr. LaFalce noted, restaurants and taverns licensed by ASCAP currently pay an average of $1.58 a day to use all of ASCAP's repertoire of about 4 million songs. That's less than the cost of a drink. Eighty percent of them pay only $1.10 a day. These music users say that there's something unfair about this system, and I can't believe it's the price.
The restaurant owners behind pending unfair legislation started by asking for a complete exemption if they got music from radio broadcasts in order to enhance the atmosphere of their places. First, they said my music was just incidental to their business. Well, let me say that no songwriter that I know of wakes up in the morning, goes to the office or wherever he does his creating and says, “today I am going to write some incidental music that nobody wants to pay for.” In every restaurant or tavern you'll find parsley on the plates, pictures on the wall, and some flowers and tablecloths on the table. All these things are incidental, but, incidentally, they're all paid for.
We've always believed that this is a market place dispute between users of property and the owners of property and should be decided in the market place. All attempts by ASCAP to sit down
and work something out with the National Restaurant Association have been met with a stonewall.
However, as Mr. LaFalce mentioned, the National Licensed Beverage Association which had initiated this legislative effort agreed and did want to work something out. An agreement has been reached that would clarify the existing law and, according to Congressional Research Service, exempt about 70 percent of the restaurants and taverns in this country. I think that's pretty impressive. It's regrettable that they're not here to speak about that agreement, because I think it would be very enlightening:
The other group behind this legislation is the National Religious Broadcasters. These owners of religious format stations are operating commercial enterprises which use our music in making really huge profits. ASCAP's license fees are just a tiny percentage of their gross revenues. Using the word “religion” should not relieve them of their obligation to pay for music. Christian music should not be valued less than any other music. To exempt religious broadcasters from paying performance fees would make the Christian songwriter an endangered species.
My music is all I have. It's what I rely on to feed my family, and it's the future that my son will have, hopefully, to carry on. It's my property. The owners of restaurants and religious broadcasters testifying before you today want to pass legislation that amounts to taking my property. Surely
this Congress, in particular, believes in market place decisions and is opposed to the taking of private property. I hope that you won't let these powerful interests run roughshod over the thousands of small businessmen like myself, who work hard everyday to create America's music. Thank you.
[Mr. Alger's statement may be found in the appendix.]
Chair MEYERS. Thank you very much, Mr. Alger. Our next witness is Mr. Epperson, and he is Vice Chairman of the National Religious Broadcasters, and he's here with us today from North Carolina. Mr. Epperson, and I will ask all of the witnesses, they've been doing a very good job so far, if you would get very close to the microphone, because we can here you up here but the speakers are in the back of the room and sometimes we loose your voice at the back. Thank you. TESTIMONY OF STUART EPPERSON, VICE-CHAIRMAN,
NATIONAL RELIGIOUS BROADCASTERS Mr. EPPERSON. I'm delighted to be here, Madam Chair and members of the Committee. On behalf of the National Religious Broadcasters Music License Committee and over 700 radio stations we represent, I want to express our appreciation for the time you are devoting this morning to music licensing issues. As a radio station owner and First Vice Chairman of NRB, I can personally attest to the abuses of monopoly power our members suffer at the hands of the music licensing organizations.
Our opponents at this table have argued that our differences are just disputes that should be settled by the courts, not by Congress. Nothing could be further from the truth.
The problem we face is fairly simple. ASCAP and BMI are Government sanctioned monopolies and any time the Government confers that kind of power on private organizations, we believe that
Congress has a duty to regulate it. Unfortunately, a previous lack of oversight by the Justice Department and an abuse of policy direction and absence of policy direction from Congress has allowed these organizations to continue abusing music users in the broadcast industry. It has led to court cases lasting 10 years or more over the interpretation of the consent decrees which were written 50 years ago.
The answer's not more litigation. ASCAP alone is involved in over 500 pending cases, we understand, right now. This is a system that is clearly broken, and Congress needs to fix it.
H.R. 789, which was introduced by Representative Jim Sensenbrenner and now cosponsored by 170 of your colleagues from both sides of the aisle, addresses two problems that our members believe are critical. The first is a requirement that the music licensing monopolies offer a per program license to radio broadcasters that is a real economic alternative to the blanket license favored by ASCAP and BMI.
The other provision is the requirement that each music licensing organization provide online access to the repertoire of works for which it is authorized to collect license fees.
These provisions of H.R. 789 introduce an element of fairness by allowing specialty radio broadcasters who play little copyrighted music to pay only for what they use. This is all we've ever asked, to pay for what we play.
Furthermore, ASCAP and BMI would be prevented from suing music users for copyright infringement over songs they failed to list on their online data bases.
If Congress passes H.R. 789, we'll finally have a licensing system that resembles free-market competition. Radio stations will be able to manage their costs more efficiently, either by choosing to play less copyrighted music or by playing more songs from a lowerpriced music licensing organization.
These are the very reasons ASCAP and BMI are fighting so hard against H.R. 789 and some of those in the Senate. Competition is apparently not in their self-interest. Over 15 years our Committee has tried to negotiate these two points. For 15 years we have had absolutely no success. ASCAP and BMI have refused to budge.
Let me give you an example of how the licensing system works today.
Most radio stations operate under a blanket license which gives them the right to play copyrighted music whenever they choose. Special broadcasters represented by my organization use very little music so we try to operate under a per program license which assess the fees based on how much of our program periods contain copyrighted songs each day. Licensing fees in both cases charged as a percentage of the station's gross revenues except—and this is the big problem—the per program rate is several times higher than the blanket rate.
Let me illustrate. My company owns WAVA here in Washington DC. Our format is mostly Christian teaching and talk, but certain programs may feature a copyrighted song so we've opted for ASČAP's and BMI's per program license.
Do we pay just for the use of a particular song we play? No. ASCAP and BMI charge us a percentage of the revenues attrib
utable to the entire program period whether we play 1 song or 20 songs.
Are we charged the same rate as stations that play music all day long? No. If we try to use the per program license offered today and we play 1 hour of music they would charge us for 3 or 4 hours. Thus, if more than one-third of our programs contain copyrighted music we could end up paying more than the rock and roll station across the street that broadcasts music 24 hours a day.
There's also an absurd amount of paperwork ASCAP and BMI requires to produce for the right to have our version of a per program license. We must log every single song we play 24 hours a day, 7 days a week. These reports must be sent to ASCAP and BMI each month, and they must be 100 percent accurate or we are subject to substantial monetary penalties. It's just another obstacle, another disincentive to using the per program license.
Why would anyone treat their customers this way, when we've just heard that a composer wants us to play their music? Well, it's a good question. ASCAP and BMI do it because it's simpler and more lucrative to force as many stations as possible to buy the blanket license and they are after all monopolies. They get away with it because there's no competition. We have nowhere else to go to shop for their music.
I have to tell the members of this Committee that our broadcasters deeply resent this unfair coercive system and respectfully implore Congress to pass H.R. 789 this year. Religious broadcasters in particular are beginning to view the obstructive stance of ASCAP and BMI as part of a larger battle with the entertainment industry.
We think to ourselves, every time we pay a religious artist, they get paid once, yet we are forced to pay AŠCAP and BMI three or four times. What's going on? Where's our money going? Does it fund acts that are morally offensive to our listeners and to most other Americans?
Religious broadcasters, classical music broadcasters, and talk radio-none of whom use much of ASCAP's and BMI's productwould be grateful for your help in passing this bill. We are not anticopyright. We are not antisongwriters. We want to encourage religious songwriters. We merely want to pay for what we play. Again, Madam Chair and members of the Committee, thank you for your attention to this difficult issue.
[Mr. Epperson's statement may be found in the appendix.] Chair MEYERS. Thank you very much, Mr. Epperson. Our next witness is Mr. Berenson, and he's with us today on behalf of BMI. He is the Senior Vice President and General Counsel. Mr. Berenson. TESTIMONY OF MARVIN L. BERENSON, ESQUIRE, SENIOR VICE
PRESIDENT AND GENERAL COUNSEL BMI Mr. BERENSON. Madam Chair, Members of the Committee, thank you for this opportunity to testify today on copyright protection. I come here today representing BMI's affiliated songwriters, composers, and music publishers. It is important to realize that BMI represents the songwriter, not the performer. For example, most people have heard of the song, "New York, New York." I would ask