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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 NRA. 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.
I had to think long and hard about speaking out today against the copyright establishment. I know it could have ramifications. But I have faith in the system, which is why I'm here.
Madam Chair, thousands of small businesses have paid the piper for years. That's not the issue. The issue is whether we live under the rules of law that are clear and fair, or under arbitrary rules of ASCAP, BMI, and SESAC, who for all practical purposes are accountable to no one.
I thank you for the time, and I'd be happy to answer any questions.
[Mr. Tavenner's statement may be found in the appendix.]
Chair MEYERS. Thank you, Mr. Tavenner. We appreciate your testimony very much. There are a number of members who have asked to submit a statement for the record, and they have asked to keep the record open for additional questions to witnesses. So, without objection, the record will be held open, and all statements will be accepted for the record.
Chair MEYERS. At the beginning we heard from the author of this legislation, Mr. Sensenbrenner, and in the spirit of fairness, Mr. Bono is here and has asked to be heard. So, we'll probably start the lights on you Mr. Bono, and we will hear from you, and then we will go to questions.
Mr. LAFALCE. Do we have to pay to listen to Mr. Bono?
Mr. BONO. Thank you, Madam Chair. I would just like to—first of all, I've been a restaurant owner and had several, and I'm also a songwriter. So, I have never experienced these days of-or nights of horror that some of the other restaurant owners have experienced. I'm not saying that they haven't happened, but I've never experienced them in all the time I owned a restaurant.
Let me just explain what I think is getting very convoluted and complicated. I think, first of all, if I can ask you one question, Mr. Tavenner. When you say the “radio," do you mean when you use the radio as entertainment in your restaurant that you shouldn't have to pay because the broadcasters are paying for that?
Mr. TAVENNER. Incidental use of the radio.
Mr. TAVENNER. Well, if it's incidental, I don't think that we should have to pay. We already have a system like you probably had in your restaurant, Muzak or something like that, that we're paying the rate on that system.
Mr. Bono. Well, then basically what you're saying is if you use the radio for entertainment, you shouldn't have to pay for the song?
Mr. TAVENNER. For incidental use.
Mr. BONO. You're contradicting yourself. You're paying on Muzak, so you shouldn't have to pay them on the radio, is what you're saying?
Mr. TÁVENNER. No, I'm saying how many times do we have to pay for them? When the live band plays in any restaurant, I pay for that, I pay on my CD machine, I pay on my karioke machine; how many times do I have to pay?