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I have asked Mr. Sensenbrenner to join us on the Committee today and to take part in our proceedings, although, he says that he may have to leave at least for a time. Despite my own strong sentiments in favor of H.R. 789, today's panel of witnesses were carefully selected in an effort to present a balanced view of the competing concerns in this area of music licensing.
At this point in time, I would like to yield to Mr. Sensenbrenner for just a moment since he does have to leave he may be back later, and then I will certainly yield to our ranking member, Mr. John LaFalce. Mr. Sensenbrenner.
(Chair Meyers' statement may be found in the appendix.]
Mr. SENSENBRENNER. Thank you very much, Madam Chair, for the opportunity to participate in today's hearing. I agreed to introduce H.R. 789, the Fairness in Music Licensing Act of 1995, after I received a number of phone calls from irate small business owners in my district complaining about something called "ASCAP” and their music licensing practices.
They were told to call their Congressman if they didn't like what was going on, and they did. Madam Chair, I applaud you for responding to these and other folks nationwide by holding this hearing today.
We on the Judiciary Committee are examining this issue from an intellectual property perspective. I commend you for examining the small business issues. Songwriters deserve a royalty for the use of their music. Congress must decide which circumstances require a payment and by whom.
Čurrent law establishes a home-style exemption. Unfortunately, it has proven unworkable and we can do better. The question on this issue, like so many others, is: How do we do better?
H.R. 789 is more narrowly drafted than similar legislation introduced in the last Congress. It is not an attempt to simply get businesses out of paying for using music, as is sometimes portrayed by the opponents.
I introduced H.R. 789 to reestablish some of the loss tenets of the marketplace to music licensing practices. The absence of these principles has brought us to the present discord. Business owners shouldn't have to pay for the music beyond their control. They shouldn't be forced to do business with every music society that demands a fee. They should be told what they're paying for, and they should have an economical method of resolving disputes at their disposal. Unfortunately, current law doesn't protect these rights. H.R. 789 fixes this problem.
Many people don't tune into the nightly news or to a football game to listen to the music. They want to know what happened, what the weather is like, and what team will win. Many broadcasts contain an incidental snippet of music.
The music licensing societies are aiming at charged fees because of this music, regardless of the fact that songwriters have already been paid by the network, by the marching band, or by the advertiser; but because you never know which piece of music or song might be broadcast on radio or TV or cable, a business owner must pay every music licensing society their asking price. The only alternative is to turn the radios and TV's off altogether, even though they're entitled to the rest of the program without paying the fee.
H.R. 789 creates an exemption for music broadcast over radios and TV. It does not affect tapes or compact discs or live bands that are brought into retail establishments. The bill addresses other concerns. Businesses often don't have any real way to know what they purchased. Song titles in the music societies' repertoires are often unavailable or accessible only with considerable effort and sometimes costs.
Without this information, it's nearly impossible to know whether one society or another offers better value, and it's almost impossible to restrict music played on tapes and compact discs to the repertoire of just one music licensing society. H.R. 789 requires the societies to make their repertoires easily acceptable and accessible.
Finally, business owners have no way to dispute an unfair fee. Current law requires a small business owner to go to a single court in New York City and spend thousands of dollars in legal expenses to dispute an improper fee, often involving only a few hundred dollars. Clearly, the businessman or businesswoman who applies a cost-benefit analysis to this decision quickly concludes there is no alternative but to pay the fee that's demanded, because the cost of going to court is so prohibitive. H.R. 789 allows the owner to seek arbitration, rather than paying excessive litigation expenses.
While I'm disappointed a solution hasn't been found to both sides' satisfaction, I am encouraged that the more people learn about this issue, the more they want to help solve it.
Last Congress' bill had 33 cosponsors, my legislation has about 170. We're moving in the right direction. Again, Madam Chair; thank you for holding today's hearing, and I thank you for the opportunity to make an opening statement.
Chair MEYERS. Thank you. Mr. Sensenbrenner, and we hope that you'll be able to return to the Committee later. Mr. LaFalce.
Mr. LAFALCE. Thank you very much, Madam Chair. We are holding a hearing this morning, very appropriately, on an issue that is controversial and very complex. We all want to be fair, but to be fair in music licensing while laudable, is not readily definable. Fairness depends on one's perspectives very often and one's interest, and there are clashes of valid but competing interests.
The small business owner who plays radio music over a speaker to improve the ambiance of his or her restaurant or store may believe that turning on the radio without having to pay a fee for music should be a personal right. But the composer of the music who's small business is to create music for public enjoyment expects and must be remunerated for the use of his intellectual property.
How do writers and publishers of music know when business establishments across the country are playing their music? I'm told that only 3 percent of music users volunteer to license copyrighted music. The other 97 percent of music users must be identified by the property rights organizations who then negotiate a licensing agreement.
We must be careful not to assume that all the proponents of H.R. 789 are small business owners, particularly restaurant owners. Some chain restaurants after all are large corporations. Some who strongly support this legislation do not even license the music they
use from the property rights organizations, such as the American Society of Composers, Authors and Publishers (ASCAP).
For example, Red Lobster and the Olive Garden rent background music from businesses like Muzak, who tape music for this purpose. Muzak has the licensing agreement with ASCAP, not these restaurant chains.
In cases of franchise restaurants, we're not talking about small business, that need protection. McDonald's and Pizza Hut are large corporations. Pizza Hut, in fact, has negotiated chain licenses with ASCAP for all it's restaurants, both the ones the corporation manages and the franchises.
McDonald's does not have a corporate licensing agreement, which means that the property rights organizations must survey each McDonald's Restaurant to determine if their music is being played, the frequency, and document its use. Chuck E Cheese used to license music for its restaurants, but decided not to continue in favor of finding the composers directly and paying them.
There's no oversight mechanism to ensure that restaurants do so. Before we in Congress jump to the conclusion that H.R. 789 would rescue small business owners from an alleged burden of paying copyright royalties for music they use, we must remember that the big winners from this legislation may well be the larger corporations that would gain a huge financial windfall from such an exemption.
When we contemplate taking away the royalties to which a music composer is entitled by law, I believe we must consider the level of burden that may be imposed on a business owner, whether it be small or large.
ASCAP has estimated that the average daily cost of a music license for the unlimited use of music in any form-radio, TV, tapes, CD's, or live-is $1.58 per day—but 80 percent of establishments pay less than $1.10 per day.
We should ask is this a burden? We must balance whether this burden of a $1.10 per day for 80 percent-more than 80 percent of the establishments is greater for the user, than is the burden for the music composer who had not received any kind of a royalty payment to which he is entitled by law.
Finally, the fairness issue also arises in regard to the mandated access to music repertoires of the music licensing organizations in printed form, a requirement that would have the organizations print out 4.5 million titles, along with the name, address, and telephone number of every writer.
The property rights organizations presently provide information via computers, the Internet, PC Modem, 800 telephone numbers, and by mail upon request. BMI also has its repertoire on CD Rom. ASCAP, I'm told, is in the process of doing so.
The information appears to be readily available to all users of copyrighted music, whether small or large businesses. We must also question whether such a mandated access requirement would be fair to the composers who have their phone numbers and addresses made available to the public through this legislation.
I firmly believe that it is imperative that we in Congress are presented
with a balance of perspectives and positions on this complex issue. The many concerns raised by this proposed legislation under
score the necessity of understanding the numerous complexities involved.
Madam Chair, that's why I wrote to you on two occasions-on April 18 and April 25—requesting three specific witnesses who I thought would add important perspective to the presentations. I do know we have four witnesses of one perspective, two of another today. But specifically the witnesses I asked for would be a witness from the National License Beverage Association, the organization which negotiated an agreement with ASCAP and BMI in November 1995 to present concerns about small business use of radio, TV, music.
I also believe we would have benefited and, therefore, requested a representative from the Church Music Publishers Association to learn how their perspective differs from that of the National Religious Broadcasters.
Now I understand that there are differences of opinion within both organizations, of course, as there is within the Democratic and Republican party, but the overwhelming position of the Church Music Publishers differs from the National Religious Broadcasters.
Finally, I especially think we would have benefited immeasurably if we would have asked Judge Harold Tyler, who is experienced in overseeing the ASCAP consent decree and its operations, to come and share the benefit of his considerable expertise with us, and I regret that my specific request could not be accommodated within one of the three. I look forward to hearing the witnesses.
Mr. ZELIFF. I would like to thank Chair Meyers for holding this very important hearing very vital to interests of small business, and would like to particularly welcome my good friend, Steve Barba, of the world famous Balsams Resort from Dixville Notch, New Hampshire.
I got to tell you that the Balsams is one of the quality resorts recognized around the world, even though you are a competitor of ours. It's great to have you here, and I look forward to your very knowledgeable testimony. If anybody knows this issue, you do, and thank you for being here.
As a small business owner myself with a country inn, Christmas Farm Inn in Jackson, New Hampshire, and another small business called Yesterdays in Jackson, I know firsthand the arbitrary nature of music licensing fees. I want to emphasize from the outset that I fully endorse the necessity for strong intellectual property rights protection in the music industry. Those who compose and perform musical works have every right to receive compensation for their efforts.
At the same time, I'm very concerned about evidence suggesting inconsistent, erratic, and heavy-handed music license enforcement practices of leading music licensing societies. Under current law, creators of music are allowed not only to collect fees at the source, but also each step along the way. Collecting compensation from both the radio station that plays the music and the local tavern that keeps the radio on as background music, for instance, is double-dipping in my judgment, and it's wrong and it's unfair.
Moreover, there's not any evidence that the enforcement of contracts for the holders of these music copyrights resembles a monopoly. Increases have been demanded despite existing contract terms,
only "blanket” licenses have been offered and the existence of a single court of appeal, namely, New York, discourages dispute resolution which can bankrupt a small business.
As a result of all of this absurdity, I have worked closely with my colleague, Representative Sensenbrenner from Wisconsin, to make music licensing fair. Representative Sensenbrenner's bill, H.R. 789, will allow small businesses to play incidental or background music on radios or TV's without paying licensing fees. Those are the royalty fees paid to licensing organizations for the right to play music.
Think about it, the last time you were at your favorite diner for breakfast and you heard Michael Jackson's latest hit song, did you say to yourself, “Gee whiz, I hope this diner is paying Michael Jackson to play this song while I eat my eggs?” I don't think so.
Under current law, the American Society of Composers, Authors, and Publishers, ASCAP; Broadcast Music Incorporated, BMI; and other music licensing organizations can demand payment from almost any music played in a place of business, be it live or rebroadcast, and no matter how many times it has already been paid. This means that if any diner, hair salon, or other small business plays a radio or television, a licensing representative can demand a royalty. That goes for music coming over boom boxes and cassette and CD's.
The bottom line is that there is no reason at all why small businesses across New Hampshire and the United States should have to pay just to have the radio playing, and I don't believe that that's fair, and I think it's just plain wrong. That's why I'm supporting and working hard to pass H.R. 789.
In closing, I'd like to commend the National Restaurant Association for their hard work, diligence and dedication to bring this issue forth. I want to thank all members of the Music Licensing Fairness Coalition for addressing this issue of great importance to small business owners. I look forward to the remaining testimony.
Again, I want to repeat, those who compose and perform music works have every right to receive fair compensation. My good friend, John LaFalce, I heard you talk about level of burden. I own three small businesses. I know what a level of burden is. I signed the front page of that paycheck, and I'll tell you, there's a big level of burden. Whether it's a $1.58 or a $1.10, everybody's nipping at the heels of small business, and we're going to bite the hand that feeds us.
Businesses create jobs. If it's not fair, we ought to straighten it out now. Again, give fairness on both sides of the issue. I look forward to the remaining testimony.
(Mr. Zeliff's statement may be found in the appendix.] Mr. SKELTON. Mr. Chairman, don't you think we ought to have some background music for this hearing?
Mr. ZELIFF. I could always count on you to come up with a common sense solution. Are you going to pay $1.58 or $1.10?
Any other Members on either side of the aisle care to make an opening statement?
Mr. POSHARD. Mr. Chairman, I ask permission to offer an opening statement for the record.
(Mr. Poshard's statement may be found in the appendix.]