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Chair MEYERS. I think maybe we should be involved in it. This has been a long ongoing thing. The compromise was not negotiated until the bill had about a hundred cosponsors. So, I think we have been a real catalyst in this. Mr. Epperson.

Mr. EPPERSON. Thank you for your efforts. You were talking about the administrative cost of the music licensing organizations. It's interesting, the legal cost involving in ASCAP's case over 500 lawsuits currently pending, and something like $23 million in legal fees last year, if I'm correct. Some of us getting sued out there— awful lot of time it is a small business people. The fact remains even if we have this repertoire with the disclaimer, the fact remains if we rely on that repertoire at a restaurant or a radio station and we go over the line, we're going to be sued. That's the bottom line. We're still-even though the repertoire's there, we're going to be dragged into court. Congressman Zeliff referred to the rate court. Well, we just had a case come out of the rate court. It lasted 10 years, it cost $15 million involving Buffalo Broadcasting. They won the per program license that we are seeking here today as religious and classical music and talk radio broadcasters, they won that. Early in that case it was claimed if I understand correctly that case was similar to radio broadcasting but since they've won, we find out it's not at all similar. It has to go through that court again, and somebody has to come up with $15 million in 10

years.

So the rate court obviously is not working. Who at this table in the restaurant business or broadcasting can go to New York City and spend $10 or $15 million in 10 years?

Ms. KELLY. Madam Chair, may I ask a residual question? I cutoff my fellow freshman Congressman from California, Mr. Bono. May I ask that he be allowed to speak?

Chair MEYERS. Yes.

Mr. BONO. Thank you very much. I just wanted to say that-how long has been, 2 years from now since we've been working on this— I'm sorry, 2 years we've been working on this.

Both parties came to me because I had a background of restaurants and songs, and I, like you, just want to go with whatever is equitable. The hard thing to imagine is that copyrights are tangible, like this chair. Though you can't see them and you can't feel them, they have to be treated as hard property. So, that creates all this confusion here. But anyway what we attempted to do was say, "Look, let's not legislate this." And when both parties came to me the restaurant industry said, "We want to solve this problem where at a football game if a song gets played during halftime, we don't have to pay." I said, "Fair enough," and operated on that basis. Then it evolved into, "We don't want to pay period." So I encouraged and oversaw with Carlos, who is the Chairman of the subcommittee which deals with copyright, a negotiation that I thought BMI and ASCAP made a very honest attempt to negotiate. At a certain point it didn't reach the expectations of the restaurateurs. So, they declined to negotiate anymore and I was disillusioned to see that happen. I would have preferred that they settle their matter, not us.

Mr. ZELIFF. Madam Chair.

Chair MEYERS. Yes. If you can conclude your remark

Mr. BONO. That's

Chair MEYERS. All right. Thank you, Mr. Bono. Mr. Hilleary.

Mr. HILLEARY. Thank you, Madam Chair. I just want to ask Mr. Barba a couple questions. You may have mentioned this in your testimony, and I might have missed it, but what do you pay for your license fee?

Mr. BARBA. For ASCAP and BMI, it's just short of $11,000 per year.

Mr. HILL. Per year?

Mr. BARBA. Per year.

Mr. HILLEARY. Just out of curiosity-and I'm just trying to get a handle on this because I'm having trouble differentiating on it. I had one of my staffers go call your-the Balsams a while ago and just ask what a rate was, and you can correct me, I'm just going to repeat what they said. You correct it if it's incorrect.

Single is $189. per person, per night; this was Memorial Day weekend coming up. A double occupancy is $295. So, double occupancy went up from a $189. to $295 per couple, per night.

That cost includes three meals per day, per person. Whether they're eating or not I take it.

Mr. BARBA. There's no other place in Dixville Notch.

Mr. HILLEARY. Then there's a 15 percent gratuity fee added onto that, as I understand it. The gratuity fee's not only on the meals part, but on the room part.

So anyway, it's basically another $100, $106 per night when you add another person and, of course, you got costs for those extra three meals, if they're eaten. But that's not $106. So, there's an additional cost is the point to that extra person when you come into that room for the double occupancy. If you got 212 rooms at your place there, you just consider a hundred-and I'm sure they're not all occupied at the same time anyway you consider all that, and that's if you did occupy it all day long, you just go take the $100. extra per person in the room, it's right around $21,000 in extra per day, and you multiply that times 365-anyway the point is that that's millions of dollars extra. Of course, you don't get full occupancy, but if it's half occupancy or a third occupancy, it's a couple million dollars extra per year.

How do you distinguish it, that's my question, how do you distinguish that variable occupancy from paying a couple times whether you listen to the music or not?

Mr. BARBA. My argument is not with the amount as much as it is with the philosophy that we are debating here today. As a Yankee, I believe in there being some equitable treatment for services that I purchase. I do believe that if this were a marketplace, a fair marketplace, an open market place, the rates could be whatever they were, and I would pay them. But this is not a free marketplace. I have no options and I'm arguing over the philosophy of paying for something that is truly incidental.

Mr. ALGER. I believe that the Balsam operations uses over $200,000 worth of live music last year as well, and some of these fees are based on that. It's not just based on background music. Mr. BERENSON. Absolutely.

Mr. HILLEARY. Let me just

Mr. ALGER. Peanuts to me, by the way.

Mr. HILLEARY. OK.

Mr. BERENSON. They keep saying there are no options. I think Congressman Skelton said, "What happens if you just want to play public domain?" That's an option. Another option is, although they may not like it is, they're free to negotiate with any copyright owner, whether it be a music publisher or a songwriter directly, but the user wants the ease of a license agreement, a blanket license agreement which gives them access to a complete repertoire. Then they complain that they have to buy the whole package. Well, you do have options. They could play public domain music, they could license directly.

BMI, ASCAP, and SESAC offer a package, basically, here's access to our repertoire and you can use as much of it or as little of it as you want. You don't like it-if you don't like that type of a package and you just want to pay for what you're using, you're free to negotiate individually.

Mr. HILLEARY. Now, I'm just having trouble figuring out why we distinguish-I mean, if there's a noncompetition thing, I think that's another issue. If there's and antitrust thing, that's another issue, but it's hard for me in my mind to distinguish the additional-we should not legislate you charging double occupancy. That market should be whatever the market can be. It seems to me in those aspects, I think would also apply to this other

Mr. BARBA. There was no offer on Congressman Bono's part to have the cab driver pay for the incidental music on his radio when he was taking a fare somewhere, but the point is that in the cab the music was as incidental to where that guy was going as is the music on the TV station when our guests are watching a golf program in the afternoon at the golf club house that's why I'm here. I truly do believe that the copyright laws are very important and that people ought to be paid for their work. I am not upset at all about the motives of these organizations. I think they are very honorable motives, and I support those. My argument is with the method by which it's raised, the equity of that method, and the universal approach that's taken. I believe that our industry is taken on as sitting ducks by these organizations, but they don't treat us in normal business fashion. They come in with more threats than with help. We have no means to negotiate, and the courts are in New York, or the court is in New York. It is not a question from my point of view of the exact amount of money that I am paying for this. I don't believe that's appropriate that I should pay at all for TV and radio broadcast when they are incidental to my business. I am happy to concede that the songwriters and the composers and publishers ought to be paid for that but not by the incidental place where the music is played just like the taxi cab driver. It would be silly for them to be chasing cab drivers around the country trying to make them pay fees for incidental music in their cabs.

Mr. ALGER. I believe the cab driver argument is ridiculous. They would be exempt by any, the home style exemption that has existed for many years. The home style exemption is there for just that reason, any place that has a normal stereo or television in its operation can play it for nothing already. They're not the ones that are being licensed. We're talking about businesses that take advantage

of the fact that music is coming over the radio and television and use that to enhance their operation. This is a completely different issue.

Mr. BERENSON. If someone wanted to use radio while some establishments use CD's for music, they're saying they shouldn't pay for radio. Well, if you put on the radio to a music station, as an example, you're just substituting the radio for CD's, and why should that be exempt? I mean, the proposed legislation says you would have to pay for CD's. It's just a different use of that music. The entrepreneur, the restaurateur, is using it for a commercial benefit.

on

Chair MEYERS. The radio has paid for a couple of depending

Mr. BERENSON. They have paid for it for their use. If someone is going to take this product in a commercial setting to enhance their business ambiance, in many instances it is a retransmission under the law. It's another use of that music. Now, people say well, it's background music, it's incidental. Well, there have been studies to show that this background music basically serves the needs of the proprietor. As an example, in a restaurant, I mean, if you play faster music, a faster beat, people will tend to eat faster. If you put on slow music, people will tend to be relaxed and will tend to stay there longer. If you use background music in a supermarket, studies have shown, people will tend to purchase more than if you don't have background music. You may not remember what you heard, but it's serving its purpose even though it's "incidental." The music in supermarkets is certainly incidental. The supermarket is not in the music business. But music has been used for their benefit to enhance their business and its ambiance. Go ahead Madam Chair. Chair MEYERS. Thank you very much. Mr. Bartlett-and then Mr. Wamp, and then we will return to see if Mr. LaFalce has closing questions, or I will take a turn in there somewhere.

Mr. BARTLETT. Thank you very much. I imagine all of you knew before you came here today that the horror stories are religion out there and that this is a very appropriate hearing here today. I am pleased to learn that there has been an agreement that small establishments are going to be exempt and establishments with less than six speakers, and no more than six, and with no more than four in one room will be exempt, and it is in dispute what percent of the restaurant business we exempt, but some percent will be exempt. I think beyond that and I've had our people come to us over several years now concerned about this, beyond that what we need is a fairness. Restaurant people and others who use music want to know what they're paying for before they're given a bill for it. That just seems to me to be imminently fair. I don't understand why you can't give them a repertoire without a discrepancy. The fact that a new song comes on the market the writer of that new song needs to understand that he can't get paid for it until the people who you are charging know that that's a new song that he needs to get paid for. You have the obligation, I would think, to provide your customers who are repeatedly using the music in restaurants and other establishments with a list. I don't care what you charge them. You can charge them a million dollars a year if you wish because this is a marketplace and if you charge them too much, they simply won't use it and soon the price of your product will reach

a market level where you're satisfied with the return and they're satisfied with the benefit they get from it, but I do not understand a system in which you use music, and you have no idea whether it is covered or not. You have no idea how much you are going to be charged. It just seems to me that up front the user has to know what music is in the public domain and what is not and what he's going to be charged is not in the public domain. Doesn't that seem fair to you and why can't you do that? And then I think the horror stories would end. Did you all agree that in the business of using the music, well, if we have this kind of a system that the horror stories would end, and I can't understand why the industry can't provide. There's no place else in our society where you get to buy a product and you are going to have to pay for it, but you have no idea how much it's going to cost you. Even in the medical profession, we don't have that situation.

Mr. ALGER. The repertoire is available. The reason it has a disclaimer on it is because of the nature of the creative process. I may be an ASCAP writer today. I may move my work to SESAC tomorrow. To update 7 or 8 million copyrights that are in the repertoire on a daily basis would be a staggering cost. It wouldn't cost a million dollars but it would be very hard to get a daily printout. The point of the disclaimer is to be in touch with the reality of how we do business.

Mr. BARTLETT. I'm still trying to

Mr. ALGER. Here's a repertoire from yesterday from the services available on my works. I've checked it. It's accurate. It covers the works that are being performed on radio and television. It didn't cost anything to get this, it's available for free.

Mr. BERENSON. May I respond, congressman. There's a few different items which you raised. Number one, the cost of the license. Let me address that.

Mr. BARTLETT. I didn't raise that issue.

Mr. BERENSON. I thought you did. OK, the cost of the license.

Mr. BARTLETT. Yes.

Mr. BERENSON. What did it cost you for the person to use the music?

Mr. BARTLETT. Right.

Mr. BERENSON. With respect to BMI, ASCAP, and I believe SESAC, I know I can speak for BMI, and I'm quite familiar with ASCAP, every license agreement that is offered to a music user has a printed rate schedule and therefore what it will cost that establishment. It's not hidden. That establishment knows what it will cost. I mean, we have been doing this for years with respect to

Chair MEYERS. Mr. Berenson, if you will excuse me and if the gentleman will yield, that's on the basis of how much the music is used in the seating capacity.

Mr. BERENSON. Each organization has a different formula. I mean I can't speak for ASCAP, but let me speak for myself and if I may ask you a question with respect to a retail establishment such as a clothing store, a space based upon square footage, with respect to a restaurant, a bar, the fee is for live music is based upon what the establishment spends on entertainment per year. With respect to recorded music that is broken down based upon the room occupancy, how many people can fit into a room. It's there.

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