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people sitting up there, who wrote it? Probably very few people would be able to respond with the correct answer. The answer is Fred Ebb and John Kander. They write songs. They don't perform. These songwriters rely upon the royalties they receive from BMI to support themselves.

You have heard and will probably continue to hear a fair amount about the plight of small business people. I trust that you will acknowledge and embrace the fact that as a genuine entrepreneur, the average songwriter is no less a small business owner than any tavern, inn, or restaurant proprietor. Indeed, songwriters are the ultimate small business people who are able to take nothing more than an idea and transform it into something of value.

This hearing today is very important, in our view, because it represents the first formal public opportunity to discuss a very important breakthrough pertinent to copyright protection and music licensing that will be very welcome news for the small businessmen and women in the hospitality industry. The breakthrough that I allude to occurred several months ago when the National Licensed Beverage Association, BMI, and the other two performing rights organizations negotiated a compromise on qualifications for exemptions for music licensing fees. Indeed, under this progressive but prudent agreement, the cost of doing business would improve for thousands of bars, restaurants, liquor stores, and other small business establishments that play radios and televisions for the enjoyment of their customers. I should, however, stress that this initiative was a compromise. It's important to remember.

In my limited time I would like to outline for you the following: What we believe the issues to be, and what offers we have made in our efforts to be pragmatic without giving away something that is not ours to give away, nor anyone else's to take away, a person's intellectual property.

First perhaps as background, I should touch on the nature of and need for what is known as a public performance license. As you know, the U.S. Constitution recognizes the rights of creators of intellectual property, including those who create music. American music is beloved not just in the United States, but around the world. The inherent property right of a musical composition is no different than that of any sort of tangible property that one can see or touch and merits the same degree of property protection.

The songwriter relies on public performance royalties for his or her livelihood. To simplify the concepts involved here, when a writer's copyrighted song is publicly performed, those who use that music must pay for the use of the intellectual property. If someone is publicly performing copyrighted music in a commercial setting, then that music user needs to obtain permission for the use of songwriter's property. This is their property. This is no different than the use of anyone's property in a commercial setting. For music, this normally takes the form of a licensing agreement.

It would be nearly impossible for the songwriter to identify everyone who is using his music in a commercial setting, and to identify each of the songs that are being performed. The administrative costs for such an undertaking would drive the costs of licensing music sky high. Hence, the performing rights organizations offer what is commonly called a “blanket license.” That is a flat fee paid

by the music user which entitles him to use any of the works in our repertoire—which in BMI's case is approximately 3 million works-over radio, television, CD players, stage, and know that they are not infringing on any of the rights of any of our affiliates.

It is not a perfect system, as previously testified, but it has worked well for the songwriter and the music user, both in the United States and worldwide. This is a system that's used in every other country that has a copyright regime. BMI and ASCAP are required under their consent decrees to basically treat similarly situated users the same. That is, a restaurant in California will pay the same licensing fee rate as that of a restaurant in Maine.

During a good part of last year, under the aegis of the House Judiciary Committee, we along with ASCAP and SESAC, met with members of interested groups that formed a coalition supporting the legislation introduced by Mr. Sensenbrenner. This bill would, in fact, exempt commercial enterprises from copyright liability for music which enhances their business, if that music is performed via television or radio. Enactment of H.R. 789 in its present form would deny songwriters and composers a large portion of their livelihood, while allowing restaurateurs the use of this property for free. I ask, and this is suggested by means of example regarding the claim that music is incidental to the restaurant business, that parsley I think, was mentioned before as incidental to the restaurant business. Everyone's gone into a restaurant, you get your plate, your dinner's on it, and there's a piece of parsley sitting on there. I would venture to say very, very few people eat the parsley. But would Congress say, “Well, since parsley is incidental to the restaurant business we should legislate that parsley growers should be forced to donate the parsley to the restaurant for nothing?” I would think not.

But let me go into the agreement which-let me go into the agreement which was reached with the National License Beverage Association, and that is as follows: Any establishment smaller than 3,500 gross leasable square feet would be exempt, no matter what they had in there. If we had a hundred speakers and hundred televisions, if the establishment is less 3,500 square feet, they don't have to pay a license fee.

Any establishment using six or fewer speakers with no more than four speakers in one room, would also be exempt, if it was over 3,500 square feet.

In an establishment-eating and drinking establishment using six or fewer speakers with no more than four speakers in any one room, would be exempt.

Any commercial establishment using three or fewer televisions of 55 inch screens, that's a large TV, with no more than two televisions in any one room would also be exempt.

This is the basis of a settlement that was reached with the National Licensed Beverage Association. The Congressional Research Service conducted a study on the figures in this compromise and concluded on the basis of size alone, just that 3,500 square feet aspect, about 70 percent of the eating and drinking establishments would be exempt under this proposal. If you add in the equipment exemptions, meaning the size of the screens and the number of speakers, even more establishments would be exempt.

We, the performing rights organizations did a lot. We increased the current exemption by a little more than 300 percent.

Now, we have attempted, meaning BMI and I know ASCAP and SESAC, have attempted to negotiate an agreement with the National Restaurant Association and some other members of the coalition. Our overtures to increase the size of commercial establishment qualified for exemption from licensing requirements, increase the size and types of equipment and other offers, were unacceptable to the NRĀ. What was even more frustrating was the NRA feedback that we received was almost a “our way or take the highway” style approach. They wanted to legislate. They did not want to compromise. Needless to say, we have still been unable to reach an agreement with that powerful trade association.

I would like to just make mention, and I'm almost done, the fact that if H.R. 789 were to pass, it would have implications internationally. We are members of the Berne Convention which requires copyright protection, and if we were to pass something such as this, we have proof from some performing rights societies that they would probably go to the WTO and claim that we would be in violation of our treaty obligations.

Now, I would like, if I could, to just address something that Mr. Epperson said, and Mr. Epperson and I have known each other for a lot of years, too many years. In terms of the religious broadcaster issue, we ask why should the songwriter be denied payment for his property when the broadcaster either accepts advertising or sells air time to a ministry? The broadcaster is a profit-making organization. Should creators of religious music be penalized because of the fact they are writing religious music? We don't think so.

I would like to address, if I may, one of the comments that was made by Mr. Epperson, namely, that there should be a per program license alternative and that it should be an economic alternative.

Prior to today's appearance, I looked at some of the same stations which Mr. Epperson is associated with. Most of the stations operate on a BMI per program license. Without giving specific numbers of the license fees, unless Mr. Epperson agrees that I can publicly disclose them, and taking only a few of the stations, WYLL located in Illinois averaged a savings by using the per program license of over 62 percent of what they would have paid on the blanket license fee. Another station, KFEX-AM California, averaged a savings of over 83 percent of what they would have paid on the blanket license fees. KBAR-AM averaged a savings of 42 percent. WMCM-AM in New York, excuse me, New Jersey, sorry, averaged 91.8 savings over the blanket fees by using the BMI per program. It is definitely an economic alternative and is a viable one. You can't get much more of a savings than 91.8 percent, unless you get it for nothing

I hope that I have helped shed some light on these issues and I welcome any questions that you have.

[Mr. Berenson's statement may be found in the appendix.]

Chair MEYERS. I'm sure there will be questions, Mr. Berenson. Our final witness today is Mr. Tavenner. He is with us today from just up the road, in Olney, Maryland. He runs a restaurant named the Silo Inn and is appearing today on behalf of the National Restaurant Association. Mr. Tavenner.

TESTIMONY OF TOMMY TAVENNER, PRESIDENT, SILO INN

Mr. TAVENNER. Thank you, Madam Chair and distinguished members of the Committee, thank you for having me here today.

My name is Tommy Tavenner, and I do indeed own the Silo Inn in Olney, Maryland. My dad opened a restaurant back in 1965, 31 years ago, when Olney wasn't a whole lot more than a single intersection. As the town grew up around us, we grew too. We now have about 50 employees at our restaurant and pub. I am testifying today on behalf of the members of the National Restaurant Association.

First, let me say that I'm a musician and an amateur composer myself. I wish I could say I have gotten far enough to be licensed with ASCAP or BMI, but I haven't. Hopefully, some day like Congressman Bono, I'll have my own hit song.

I've paid licensing fees to ASCAP and BMI for nearly 30 years now. For 2 nights of live music a week, we pay more than $2,400 a year, considerably higher than a $1.50 a day. Sometimes I feel like the biggest fool in Maryland. I have no idea what I'm paying for or why I pay for what I pay. I have a file as thick as an encyclopedia showing my efforts to understand the rates. Included in that file are what I call “the New York lawyer letters.” Letters threatening me with lawsuits for failing to pay what I'm told to. It's a strange way of doing business. Unfortunately, current law appears to let the music licensers get away with it.

“Scam” is a harsh word to use, but I've heard enough to convince me it's not inappropriate for describing what is happening to us in the small business community. Let me share a few stories, including some from colleagues who have taken time to be with us today, two colleagues from Virginia, Tom Jackson, who owns Shooter McGees in Alexandria. It took him 3 years and the lawyer to finally prove to BMI that he shouldn't have to pay for karioke, a dance floor, and a 200 seat restaurant; because he doesn't use karioke, doesn't have a dance floor, and seats only 70 people.

Let's take Calvin Scvillee from Whitey's in Arlington. When the ASCAP representative first visited him and told him what he owed he said, “Fine.” Then he asked for a written bill. The ASCAP representative wrote down a bill on a napkin and handed it to Calvin. Although ASCAP and BMI have spent thousands of dollars on ads trying to convince you these problems don't exist, they do.

Litigation threats and abusive collection I've cited are real. I did not make them up. They actually happened. In fact, they are happening every single day in small businesses around the country.

That's why 2 years ago the National Restaurant Association joined with a broad coalition including the National Retail Federation, the NFIB, and others to ask Congress to make some changes.

Our courts of law recognize that whenever a handful of companies control one market, there's a potential for abuse. That's why ASCAP and BMI currently operate under court orders. Unfortunately, however, the last 40 years have shown that these orders don't provide any real protection.

If you don't understand the fees, if you object to being charged one fee while the business down the street is paying a wildly different rate, or if you can't get a straight answer about what each

music society represents, you have just one option: To file suit in one Federal court in New York City.

To use the word “arbitrary” in describing the fees and tactics is the ultimate understatement. In my case, it took me 3 years to get ASCAP to reduce my fees when they decreased our music program. For the last 342 months, I've been trying to get a credit I've been entitled for overpayment in 1995. I can cite example after example like this.

But you learn quickly that if you question anything, a lawsuit threat isn't far behind. Over 60 percent of National Restaurant Association members surveyed recently say they have been threatened with lawsuits or other pressure tactics to get them to pay.

Like most small businesses, I don't have a lawyer on staff. I either have to rely on my own savvy or hire a lawyer. Madam Chair, as a small business owner, I simply don't have the resources to go up against an army of ASCAP or BMI lawyers and a rate court in New York City. It's David versus Goliath.

We need a system that works better for the little guy. I am here to ask you to support H.R. 789. H.R. 789 would make it clear that businesses are not required to pay licensing fees when they flip on a radio or TV in the background. ASCAP, BMI, and SESAC already collect millions from radio and TV broadcasters. To get a business owner to pay up because of something we have in the background, like a commercial jingle during a TV show is excessive.

Second, let's find a way to resolve fee disputes in the location where we do business. H.R. 789 would let us take our problems to and get them resolved by a third party arbitrator. This is fair. The music societies say this is unacceptable. They want to force all small business music users in every State to go to the court in New York City.

Third, let's make sure businesses can get information. Right now any small business that tries to save money by playing music from just one group's song is out of luck. H.R. 789 requires the music licensers to give us access to paper and online lists of their songs.

I also want to tell you what H.R. 789 does not do, because I think there's a lot of misinformation. It does not exempt any business from paying licensing fees for CD's, tapes, or live music. It doesn't deny songwriters royalties.

Let me add one last thing. The National Restaurant Association, the NFIB, and all the members of the music licensing coalition have been working to find a resolution both sides can live with. The National Restaurant Association and the coalition do not support the agreement made with the National License Beverage Association.

Contrary to what you'll hear today, a majority of the restaurant industry would not be covered by that NLBA deal. It proposes an extremely narrowed business exemption for radio and TV.

BMI, ASCAP, and SESAC like to portray us as a bunch of greedy small business owners trying to deny fees to songwriters. I'm willing to bet that if any songwriter came to my restaurant and got some idea of the way ASCAP and BMI charge and collect fees, they'd know why I am sitting here today.

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