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TESTIMONY OF STEPHEN BARBA
PRESIDENT, THE BALSAMS GRAND RESORT HOTEL

DIXVILLE NOTCH, NH
BEFORE THE HOUSE SMALL BUSINESS COMMITTEE

MAY 8, 1996

Madame Chairman and members of the committee. Today is an important day.

My name is Stephen Barba and I first want to say "thank you" for hosting this important hearing--especially, thanks to my good friend, Bill Zeliff, who succeeded me as president of both the New Hampshire Travel Council and the New Hampshire Lodging and Restaurant Association. As a resort owner himself, probably more than anyone, he understands my frustration with this issue, and has been one of the best proponents of fixing the problems that exist with the music licensing societies.

I am the President and Managing Partner of The BALSAMS Grand Resort Hotel, a 212-room seasonal resort high in the White Mountains near the Canadian border. We are a destination resort in our 131st summer season with three rooms of live music and entertainment each night. Our hotel is in a very remote area--in fact, the nearest stoplight is 50 miles away. You may have heard of my town, Dixville Notch. We're the folks who vote first in the New Hampshire primary and the national elections. Dixville Notch may be a small town of 25 but we know a big-city racket when we see one. And that's why I came here today--to tell you why America's music licensing system is well overdue for reform.

I have been in the hospitality business my whole life. I've dealt with almost every kind of contracted supplier and vendor imaginable. But I can honestly say I have never had a business relationship that comes close to resembling the one I have with the music licensing societies--ASCAP and BMI. It is completely one-sided. They bill us, we are forced to pay without knowing how their rates are set, and we have no practical way of contesting a fee we think is unfair. In my business, I've come to find that it is too expensive to "whistle while I work."

As you can see, I'm not alone in my belief. And today I speak for hundreds of business owners in my state. As a past chairman of the American Hotel & Motel Association's national Resort Committee, I have heard the same complaints over and over from colleagues about the unfair pricing and strong-arm tactics of ASCAP and BMI.

Consider the case of my friend, Fritz Koeppel, a New Hampshire hotel owner who was approached by an ASCAP investigator. The inspector said Fritz's piano player had sung Zip-a-dee-doo-da--an ASCAP-licensed song--as a request the night before. ASCAP hit Fritz with a lawsuit for $50,000 for that.

Before I go on, let me make one thing clear. Our complaint is not with the songwriters of this country. They certainly have a right to collect royalties for legitimate performances of their music. But we have a big argument with these giant collection agencies that represent the songwriters.

My own eye-opening introduction to music licensing came in my very first year of management at the BALSAMS. I was in my lobby office one morning when three men in suits appeared. They had stayed overnight and heard music being performed in one of our nightclubs. They said they were from ASCAP and that our live band was playing songs copyrighted by ASCAP artists.

Right away, they started threatening my partner and me with a lawsuit. They demanded we sign a contract with them immediately and start paying for licensed music at their rates. And what if I didn't want to pay their fee, we asked? They said the only way we could challenge this fee was to initiate a lawsuit in one, single court in New York City-a ridiculously expensive prospect for any business owner. With a lawsuit and a potential penalty of $20,000 per song hanging over our head, we eventually signed. Today we pay a total of $10,752 each year to ASCAP and BMI. And we can't fight them because it costs more in legal fees than to pay their invoice.

That is why I and thousands of business people like me are imploring Congress to act on this issue. We support a bill, H.R. 789, that would instill some common sense and fairness to music licensing. More than 170 House members--Republicans and Democrats alike--have signed on to H.R. 789. I want to point out two reasons why I support this bill.

First, H.R. 789 would stop licensing groups from "double dipping“ on fees. Right now ASCAP and BMI can hit up a hotel or restaurant for licensing fees on background music that comes over television and radios. That is patently unfair because the rights to use that music have already been paid for, usually many times over, by television and radio stations. To then charge us for something as incidental as a jingle on a television commercial that we neither knew would be played nor was the purpose for turning the television on smacks of opportunism.

I want to give you an example to be sure you understand what I mean by unfair "double dipping." Think about when you see Michigan State's marching band play a song at halftime of a nationally televised football game. Now guess how many times ASCAP and BMI collect fees when that song is played over the air. Once? Twice? Three times? No, they collect fees five times from five different sources--once each from the stadium, the national TV network, the local TV station, the local cable system, and -- finally -- from the bar that is showing the game. That's not double dipping, folks, that's quintuple dipping!

Second, I'm glad that H.R. 789 would set up a fair arbitration system. Right now, music licensors have free rein to set and raise fees. They hold the threat of a lawsuit over your head until you pay, and the only place to challenge their invoice is in a single New York City courtroom. Unless you have the money to hire lawyers and fly to New York, you are 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 where by a business owner 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 difference of opinion but could not work out any mutually 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. But 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 -- which is 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 1 1/2% interest per month or 18% per year.

From day one, ASCAP and BMI have misrepresented this legislation. It is 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 is clear that ASCAP and BMI need to be reined in. 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's turn to address the larger picture. I ask you to move forward on H.R. 789.

Thank you for your consideration.

BMI

Statement of Marvin L. Berenson
Sr. Vice President & General Counsel

BMI
Before the Committee on Small Business

U.S. House of Representatives

Wednesday, May 8, 1996

Madame Chair, Members of the Committee, thank you for this opportunity to testify today on copyright protection. I come here today representing Broadcast Music Inc.'s (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." But who wrote that song? Two songwriters named Fred Ebb and John Kander. They write songs. The same is true for Pat Alger. They don't perform. These songwriters rely upon the royalties they receive from BMI to support themselves. Pats royalties are administered by ASCAP.

Obviously, you're likely to hear a fair amount today about the plight of the small business person. 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 of sorts 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 small business men and women in the hospitality industry. The breakthrough that I allude to occurred several months ago when the National Licensed Beverage Association (NLBA), BMI, and the other two performing rights organizations negotiated a compromise accord on qualifications for exemption from 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

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provide a more efficient and economical system that will benefit songwriters and music publishers. I should, however, stress for the Committee that this initiative was a compromise.

In my limited time, I would like to try to outline for you:

1) what we believe the issues are, and

2) 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 public performing rights licensing. 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 U.S., but around the world. The inherent property right of a musical composition (intellectual property) is no different than that of any sort of tangible property that one can see or touch and merits the very same degree of property protection.

When a songwriter creates a musical work, he or she will be compensated to some extent by a record company if a recording artist uses that songwriter's creation on the album. However, 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 (those who cause it to be publicly performed) must pay for the use of that intellectual property. If someone is publicly performing copyrighted music in a commercial setting, then that music user needs to obtain permission to use the songwriter's property in their business. This is no different than the use of anyone else's property in a commercial setting. For music, that permission usually takes the form of a licensing agreement.

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