National Restaurant Association concessions

The other side

Section 1.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Section 7.

Section 8.

Section 9.

Music Licensing
Fairness Coalition

THE FAIRNESS IN MUSICAL LICENSING ACT OF 1995
H.R. 789

Cites title as the "Fairness in Musical Licensing Act of 1995."

Expands current law to exempt certain businesses from having to
pay for incidental uses of music. Businesses that do not charge a
fee related to the music or whose music is to incidental their main
businesses would be exempt from licensing obligations.

Establishes the right to binding local arbitration to resolve licensing disputes between music users and licensing organizations. Current law requires all disputes, regardless of the amount in dispute or the size of the business involved, to be resolved in federal court in New York City.

Requires licensing organizations to offer radio broadcasters flexible
license fee structures that account for specialty broadcasters' (e.g.,
religious, classical, foreign language) limited use of music. Also
authorizes licensing disputes to be decided in local federal courts
rather than a sole New York City court required by current law.

Requires licensing organizations to publish written directories of
their repertoires every six months and to provide updated computer
on-line access to their repertoires. Currently it is a practical
impossibility for businesses to avoid paying all three societies,
because it is extraordinarily difficult to learn what songs each society
licenses.

Requires the Department of Justice to report annually to Congress
regarding their oversight of the music licensing system. The
Department's role results from its being a party to the court-
approved consent decrees that govern the societies' activities.

Requires licensing societies to respect contractual arrangements
regarding music licensing liability among owners, lessors, lessees and
sublessees of property (e.g., convention centers, trade shows and
exhibitors).

Exempts religious service broadcasts from license fee obligations.
Definitions and conforming amendments.

THE FAIRNESS IN MUSICAL LICENSING ACT OF 1995

H.R. 789

THE ISSUE

After years of heavy-handed, monopolistic practices by ASCAP, BMI and SESAC, a strong coalition of smaller business including restaurateurs, retailers, and specialty radio broadcasters is urging Congress to level the playing field by enacting the Fairness in Musical Licensing Act of 1995. This legislation, introduced by Rep. F. James Sensenbrenner, Jr. (R-WI), would amend federal copyright law to provide fair protection against arbitrary pricing, discriminatory enforcement and abusive collection practices of these music licensing organizations.

THE LEGISLATION

SECTION 1. Cites the title of H.R. 789 as the "Fairness in Musical Licensing Act of 1995."

SECTION 2. Expands current law to exempt certain business from the requirement to pay for the use of incidental radio and TV music.

Under current law, businesses such as restaurants, retail stores and dentist offices that use radios or TV's are generally exempt from paying copyright licensing fees when they play a single "homestyle" radio or TV. Recognizing that rapid technological advances in home electronics have confused the definition of "homestyle," the Act exempts businesses using radios or TV's from licensing fee obligations so long as the music is background or incidental to the main purpose of the business and customers are not charged a fee to listen to the music.

SECTION 3. Establishes the right to binding arbitration in resolving licensing disputes between music users such as restaurants and retail stores and the music licensing organizations.

Currently, ASCAP, BMI AND SESAC have monopoly power to set fees, raise rates and penalize businesses that fail to meet their demands. Any business that objects has no recourse other than to file a costly lawsuit in the federal court of the Southern District of New York, the only court authorized to handle such disputes. Such costs are prohibitive for most music users, especially smaller businesses, and eliminates any negotiating leverage they might otherwise have regardless of the facts of the case.

SECTION 4. Requires music licensing groups to offer radio broadcasters alternative licensing agreements.

Music licensing organizations refuse to offer radio broadcasters a reasonable alternative to their "blanket" licenses which, in effect, require stations to pay for the rights to air music 24 hours a day, seven days a week. As a result, stations that broadcast limited amounts of copyrighted music, such as religious, classical music and foreign language stations, are being forced to pay for music they don't even play. The Fairness in Musical Licensing Act of 1995 requires ASCAP, BMI and SESAC to offer radio broadcasters a license fee structure that varies in proportion to the amount of music they play.

SECTION 5. Requires licensing organizations to provide information about their repertoire.

A music user that wants to know what it is paying for or, possibly, to manage its music use in a more economically rational way cannot do so because, for all practical purposes the repertoires are not accessible. The Act requires the licensing organizations to identify both in print and on-line, the musical titles they represent.

SECTION 6. Requires the Department of Justice to exercise increased

oversight.

Under the court-approved consent decrees that govern the practices of the two largest music licensing societies ASCAP and BMI -- the Justice Department is responsible for bringing compliance issues to the court's attention. In the past, music users have found their complaints to the Justice Department generally ignored. The Act will require Justice to report to Congress annually on the nature of complaints they receive about consent decree compliance and the actions they have taken in response.

SECTION 7. Prohibits "vicarious liability."

The Act states that the owner of a facility or the organizer of an event shall not be liable for the failure of a lessee or exhibitor to properly license musical works it uses as long as the contract for the use of the space prohibits such infringement and the owner or organizer has no control over the music selection.

SECTION 8. Exempts the broadcast of religious services.

Current law exempts the use of copyrighted music in church services from the requirement to pay license fees. The Fairness in Musical Licensing Act of 1995 extends the same exemption to the broadcast of live or pre-recorded religious services.

SECTIONS 9 AND 10. Conforming amendments and definitions.

MYTHS AND FACTS ABOUT MUSIC LICENSING

and

WHY H.R. 789 IS NECESSARY

MYTH: Music licensing organizations represent the "little people."

FACT:

ASCAP, BMI and SESAC are bureaucratic monopolist collective bargaining agencies.
They are music's equivalent to the local power or telephone companies, but in the absence
of accountable public oversight there is virtually no limit on their prices and little oversight
of their business practices.

MYTH: The current music licensing system is market-oriented and fair to all participants. FACT:

FACT:

In the free market, customers can inspect what they are buying and negotiate a fair price,
or purchase an alternative product. Music licensing customers get no product information,
no comparison shopping opportunities, and no way to choose an alternative product
because no one knows whether a song is in the repertoire of ASCAP, BMI or SESAC until
a lawsuit is threatened or filed.

The music licensing societies use their monopoly powers to force specialty radio stations to pay for costly "one-size-fits-all" licenses, regardless of how much music they actually use.

MYTH: The current music licensing system protects America's intellectual property and
American songwriters and publishers.

FACT:

songwriters and publishers

The secrecy-laden music licensing system best protects its administrators, who not only
exploit their monopoly position to treat licensees unfairly, but who also treat the
beneficiaries
with impunity. It has been reported that
more than $140 million collected annually by the societies is used for "overhead"
including the accumulation of a litigation fund in excess of $100 million that is explicitly
used to intimidate small businesses into "compliance."

MYTH: ASCAP and BMI are required by their consent decrees to license anyone who asks at a fair price. Rate disputes are handled fairly pursuant to the ASCAP and BMI consent decrees.

FACT:

"Fair" prices are determined by the societies, and can only be challenged by initiating a lawsuit in a single court located in New York City. The mere cost of the airline ticket and lawyers persuade most small businesses to pay whatever fee is demanded rather than fight. FACT: During the entire forty-five year history of the current music licensing scheme, only three music users have been able to afford the millions of dollars it costs to initiate a case and continue it through to a verdict. In each case, however, the user was victorious in court, which demonstrates that access to the system the key to fairness in musical licensing. This is hardly a system that is fair to small business.