I understand there's a finite number of times that

Mr. BONO. Let me see if I can clarify that. Let's say a song is like a painting, and somebody rents a painting right near you. They only use it at 6 o'clock at night, but they pay all day. So, it would be like saying, "Let me hang this in my place because you're paying for it, that way I don't have to pay the intellectual rights or royalties on that painting or the rent because it's here.

Or what about when you take a taxi cab from the airport and someone's going to the exact same destination and you share a cab with them. Both of you pay. It's the same ride. So, I don't understand the reasoning of when you say you don't have to pay for that entertainment, because the radio, the broadcasting company paid for that entertainment. But they didn't pay to give anyone the rights to pirate that. Now, we're saying right now that China can't pirate intellectual property or copyrights. We're up in arms because they seem to be pirating $2 billion worth. We have a contract with them, and they're not dealing with their contract.

Well, basically you're pirating the music from the radio, and you're justifying it by saying I paid for it over here. So, I just can't make that equation, even when I owned a restaurant.

Mr. TAVENNER. Well, I see what you're trying to get at if in my restaurant I'm playing the music four or five times

Mr. BONO. I understand that. You're playing it a sixth time with the radio

Mr. TAVENNER. I'm trying to feed into your example. If I was to pay for each time that I played it, that would be one thing. But that's not exactly the way we're charged, and you know that. We're charged on the square footage of our establishments and/or how much we paid for a blanket license every year on cost of entertainment, on cost of CD's or cost of TV's, each one of those categorically.

Then they go and say when you play ASCAP songs 489 times in your restaurant and we're going to charge you for that. If, in fact, we use your example of your painting, it's one entity and if we paid that 489 times they wanted to charge us at, that would sure be a lot fairer. But to say to us, you have to pay for-we don't have any arbitration right to come and negotiate that with you, and that's a disadvantage to

Mr. BONO. I can't understand how-now let's get this straight. The radio paid the songwriters to broadcast that music. Now they didn't pay for anyone to take that music and use it commercially, that has never the contract between the two. So, if you played that music then we are going to have to go to the broadcasters and say, "Well, your going to have to up the price to level that."

Mr. TAVENNER. You and I right now are arbitrating-we're negotiating, and if we had to have access, that would by OK with me. If I could go to my local ASCAP guy and explain to him how I run my specific restaurant, which is an individual case I'll grant you, then at least I have a shot at this.

Mr. BONO. Now, ASCAP and BMI, I've been sitting with this for a year, have come to you and said, "All right. Forget the radio at a certain point." And 7,500-so they had, virtually, bent over backwards to say, "OK." So you do let's come to something.

Now you guys are saying uh-uh, and I don't like the notion that we are saying you can pirate music off the radio, but you can't pirate their where's the logic in that?

Mr. ZELIFF. Let me jump in

Mr. TAVENNER. I just want to say real quick, we're not saying uh-huh to them. We're saying we haven't gone far enough. Mr. BONO. I—

Mr. TAVENNER. We have to have arbitration

Mr. ZELIFF. I think this is a good healthy discussion, but we're going to have to end it. We're running out of time.

Mr. BONO. OK.

Mr. ZELIFF. I'll just make one comment. You're missing a great opportunity to get everybody that's riding to work that has a radio, people in their homes that have a radio or TV.

Mr. BONO. That doesn't have anything to do with what we're talking about here.

Mr. LAFALCE. Mr. Tavenner, are you related to Mary Tavenner? Mr. TAVENNER. No, I'm not.

Mr. LAFALCE. Mr. Berenson, I was impressed with your agreement, that I guess you and ASCAP have ventured into with the National License Beverage Association. Now, as I understand it, you exempt any establishment, eating or drinking, with less than 3,500 gross leasable square feet; is that correct?

Mr. BERENSON. Yes, sir.

Mr. LAFALCE. Mr. Tavenner, what percentage of the restaurants belonging to the National Restaurant Association would be exempt from that agreement, if you would agree to go along with it?

Mr. TAVENNER. The numbers that Mr. Berenson's group uses don't exactly match the ones that we have.

Mr. LAFALCE. Well, I want your numbers, that's why I'm asking. Mr. TAVENNER. I have them right here for you.

Mr. LAFALCE. If you have 3,500 square feet, what percentage of your restaurants would be exempt?

Mr. TAVENNER. Approximately one-third would be affected positively

Mr. LAFALCE. Let me just ask this, rather than give a quantitative would be affected positively, how many of your restaurants belonging to the National Restaurant Association have 3,500 square feet or less?

Mr. TAVENNER. Well, we keep data up to 2,500 square feet, so our numbers show that approximately one-third of those restaurants would be affected positively.

Mr. LAFALCE. Well, one-third of the 2,500; is that correct?

Mr. TAVENNER. No, that's not correct.

Mr. LAFALCE. Surely.

Mr. TAVENNER. Well, for the record, approximately a third of restaurants would be affected by the 3,500 square feet or less, an agreement that was agreed to by NLBA.

Mr. LAFALCE. Do you or do you not keep data with respect to square footage above 2,500?

Mr. TAVENNER. Yes, we do.

Mr. LAFALCE. Mr. Tavenner, why did you make a statement that you only keep it with respect to 2,500 or less?

Mr. TAVENNER. 3,500. Î just misread my-I apologize.

Mr. LAFALCE. Very good. What about when you estimate about 70 percent of the eating and drinking establishments would be exempt under that proposal alone?

Mr. TAVENNER. Because in their study, they didn't ask 74 percent of the restaurants what their square footage was.

Mr. LAFALCE. They did a random sampling of only a quarter of the restaurants; is that what you're saying?

Mr. TAVENNER. That's the numbers we got

Mr. LAFALCE. I'm talking about-simply 25 percent to make an estimate, it's better than most polls.

Now, let's go on further. An establishment using six or fewer speakers with no more than four speakers in one room would also be exempt, so that's a—are you listening to me, or to your counsel? Mr. TAVENNER. Yes, I am, sir. I'm sorry.

Mr. LAFALCE. Well, that's one more criteria. Now, on top of that, independently of that, if you have fewer than six speakers with no more than four speakers in a room, you're also exempt. NowMr. TAVENNER. If you think that's nice and generousMr. LAFALCE. Well, I think so, but maybe I'm wrong.

Mr. TAVENNER. I think that's a nice start, but we're asking for

more.

Mr. LAFALCE. I think you hit the nail exactly on the head. It's a very generous exemption, but you still want more.

Mr. TAVENNER. We want

Mr. LAFALCE. Let me try to quantify this now. The restaurants I go to, I don't know how many of them use more than six speakers. Do you have any data on what percentage of your restaurants use more do you want to take a guess Mr. Tavenner?

Mr. TAVENNER. I couldn't because I don't work for the National Restaurant Association. I work for Silo Inn, Incorporated. Mr. LAFALCE. Well, all right.

Mr. TAVENNER. I would be stabbing at the dark, but we would be glad to submit to you any questions you have on those

Mr. LAFALCE. Well, I think it would be interesting, because if we CRS is collecting and if we're also going to regardless of size, establishments of six or fewer speakers, with no more than four speakers in one room, it seems you're going to have more than 70, whether it's 71 or 95.

Mr. TAVENNER. I understand the question

Mr. LAFALCE. What about exempting any commercial establishment that's using three or fewer televisions of 55 inch screen size or smaller with no more than two TV's in one room, it would also be exempt.

Mr. TAVENNER. Yes, sir.

Mr. LAFALCE. So, that's going to increase the percentage that's already exempt. We have restaurants, according to CRS, and drinking establishments-somewhere in between the range of 70 to 100 percent would be exempt.

Mr. Berenson and Mr. Alger, if you assumed all three of those concessions that you agreed to, what percentage of eating and drinking establishments would be, in fact, exempt?

Mr. BERENSON. I don't have any such number, Congressman. As you said, it would certainly be greater than 70 percent, and somewhere less

Mr. LAFALCE. So, you're really talking about the bigger restaurants or drinking establishments, then it would be within this embrace. Those that would have more than six speakers, those that would have more than three TV screens larger than 55 inches, and those with more than 3,500 gross leasable square feet; is that correct?

Mr. BERENSON. That is correct, sir. What we are trying to do is accommodate the needs of the small businessman's complaints, not the large businessman. We're taking the property of the songwriter and giving it to a small businessman. Under these conditions, you can use it without payments.

Mr. LAFALCE. Complaint is a very important one too. As I understand, you've agreed to have determinations of fact reasonably reached throughout the country; is that correct?

Mr. BERENSON. Yes, sir. BMI, ASCAP, and SESAC have agreed that with the negotiations with the National Licensed Beverage Association and the National Restaurant Association, that we would agree to regional arbitration as to facts. Not to settle a fee rate, but in a determination as to where a restaurant would fall into, if there's a dispute amongst the facts, and if those facts would include also

Mr. LAFALCE. Subject to this regional arbitration, how often a song is or isn't being played, how often the music is or isn't being played, et cetera.

Is that a factual determination?

Mr. BERENSON. The factual determination as to not necessarily which songs are being played, but how often they're being played, if the license fee is based upon the number of nights that the establishment-that would be a fact. So, yes.

Mr. LAFALCE. Now, with respect to regional arbitration that you've agreed to, how many regions have you agreed to, is this being worked out?

Mr. BERENSON. We were talking for a compromise, Congressman, probably about six or more.

Mr. LAFALCE. All right.

Chair MEYERS. Thank you, Mr. LaFalce. Mr. Zeliff.

Mr. ZELIFF. Thank you, Madam Chair

Chair MEYERS. If I could take just a second. The reason I am leaving and coming back is because I have a markup in another Committee. I apologize for all the disruption, but I find this extremely interesting. Mr. Zeliff.

Mr. ZELIFF. Thank you. Mr. Berenson, just a few questions. I want to make sure I understand you right. If we did this legislation and it was passed, you said that would threaten worldwide treaties, it would be against that; is that what you said?

Mr. BERENSON. No, I said that it could be construed as a violation of our commitments under Berne-the Berne Convention. We have had indications from the Irish Society that they would treat such as a violation and would retaliate through a doctrine which is referred to as "reciprocity.'

A foreign government will say if you're not going to collect and pay us for these performances, we're not going to pay America.

Now, copyrighted music, intellectual property, is one of those few areas where there is a definite positive balance of money coming

into the United States. American music is used throughout the world and money flows into the United States

Mr. ZELIFF. I appreciate that, and we'll certainly take that into consideration. When you look at the process of charging fees, how do you do it, what's your formula? If you can just quickly, I've just got a series of questions here, if we could just kind of quickly answer those just for the record.

Mr. BERENSON. Congressman, it really depends upon the particular universe you're referring to. Let me give you an example. The hotel, we were talking about hotels before, BMI, and I know ASCAP does, negotiates with the industry Committee, the hotel and motel association.

Negotiations are set, then they go on and ultimately-a reasonable license fee is agreed to between the performing rights organization and the industry association. Then that fee is basically offered to members of their constituency, the hotel industry.

With respect to the restaurateurs, we have I know BMI and I know ASCAP also has attempted to sit down with the National Restaurant Association and negotiate a license fee structure for the restaurant industry. We have been met with, "No, we cannot, we don't have that authority, or we don't want to.'

Mr. ZELIFF. I understand there are obviously strong feelings on both sides, but did they not attempt to negotiate-I don't want to referee that battle. On the local universe how much revenue does ASCAP collect? How much does BMI collect? What is the total revenue you're taking in, and what's the bigger picture here?

Mr. BERENSON. I cannot speak for ASCAP, obviously, Congressman. With respect to BMI, considering revenues generated from all sources within the United States, and as I mentioned, American music is very popular outside of the United States, so we have a substantial amount of revenue coming from overseas, we're talking in the neighborhood of $325 million.

Mr. ZELIFF. So, that's a fair amount of change. What would you estimate ASCAP, are they bigger or smaller?

Mr. BERENSON. I believe they've taken

Mr. ALGER. Over $40 million.

Mr. ZELIFF. More than $40 million. Again, I don't want you to misunderstand where I'm coming from. How do we legitimately pay for legitimate costs to folks who legitimately deserve payment, and not necessarily five times but in a fair process, how do you compensate your representatives? How are they trained? I mean, are they lawyers, are they salesmen, are they independent contractors, do they get paid by commission?

Mr. BERENSON. I'm sorry, sir. I didn't have

Mr. ZELIFF. The people who you send out from BMI to call on individual businesses.

Mr. BERENSON. What we have, with respect to BMI, and I cannot speak for ASCAP in this case, we have been attempting to license-obtain licenses via telemarketing, because obviously the cost of sending someone out is very expensive. They are not lawyers, they're people.

Mr. ZELIFF. What

Mr. BERENSON. When we have a situation where a restaurateur or a hotel, a music user, for some reason wants to meet with some