My own eye-opening introduction to music licensing came in my very first year of management at the BALSAMS. I was in my lobby office one morning when three men in suits appeared. They had stayed overnight and heard music being performed in one of our nightclubs. They said they were from ASCAP and that our live band was playing songs copyrighted by ASCAP artists. Right away, they started threatening my partner and me with a lawsuit. They demanded we sign a contract with them immediately and start paying for licensed music at their rates. And what if I didn't want to pay their fee, we asked? They said the only way we could challenge this fee was to initiate a lawsuit in one, single court in New York City--a ridiculously expensive prospect for any business owner. With a lawsuit and a potential penalty of $20,000 per song hanging over our head, we eventually signed. Today we pay a total of $10,752 each year to ASCAP and BMI. And we can't fight them because it costs more in legal fees than to pay their invoice. That is why I and thousands of business people like me are imploring Congress to act on this issue. We support a bill, H.R. 789, that would instill some common sense and fairness to music licensing. More than 170 House members--Republicans and Democrats alike--have signed on to H.R. 789. I want to point out two reasons why I support this bill. First, H.R. 789 would stop licensing groups from "double dipping" on fees. Right now ASCAP and BMI can hit up a hotel or restaurant for licensing fees on background music that comes over television and radios. That is patently unfair because the rights to use that music have already been paid for, usually many times over, by television and radio stations. To then charge us for something as incidental as a jingle on a television commercial that we neither knew would be played nor was the purpose for turning the television on smacks of opportunism. I want to give you an example to be sure you understand what I mean by unfair "double dipping." Think about when you see Michigan State's marching band play a song at halftime of a nationally televised football game. Now guess how many times ASCAP and BMI collect fees when that song is played over the air. Once? Twice? Three times? No, they collect fees five times from five different sources--once each from the stadium, the national TV network, the local TV station, the local cable system, and -- finally -- from the bar that is showing the game. That's not double dipping, folks, that's quintuple dipping! Second, I'm glad that H.R. 789 would set up a fair arbitration system. Right now, music licensors have free rein to set and raise fees. They hold the threat of a lawsuit over your head until you pay, and the only place to challenge their invoice is in a single New York City courtroom. Unless you have the money to hire lawyers and fly to New York, you are forced to pay what they say and keep your mouth shut. H.R. 789 would stop this practice. It sets up a fair third-party arbitration system where by a business owner could settle any contract dispute in their own state, without having to hire lawyers and fly all the way to New York City. Last October, I and some colleagues in New Hampshire met with some representatives of ASCAP and BMI in our state capital, Concord. We discussed our difference of opinion but could not work out any mutually acceptable solution. As a result, I believe H.R. 789 is a necessary step in the right direction. That's why I wrote a letter to my local newspaper explaining why Congressman Zeliff is right to support this bill. But guess what happened on January 31 of this year? An ASCAP representative arrived at my place of business to audit my books to see if more money was due to them. Yes, their contract which is essentially demanded on a "take it or leave it" basis - gives them the right to audit my books, just like the IRS. The audit produced additional fees of $911, plus interest of $693 figured at 1 1/2% interest per month or 18% per year. From day one, ASCAP and BMI have misrepresented this legislation. It is silly to suggest that this bill will stifle the next generation of songwriters. Hardly. Songwriters and licensing societies will still be compensated handsomely from broadcast networks, cable, satellite systems and from businesses, like mine, that provide entertainment through live and taped music. It is clear that ASCAP and BMI need to be reined in. State governments have already started recognizing this, in limited ways. In the past year alone, at least 16 states have passed laws cracking down on some of the business practices of these groups. Now it's Congress's turn to address the larger picture. I ask you to move forward on H.R. 789. Thank you for your consideration. BMI Statement of Marvin L. Berenson BMI Before the Committee on Small Business Madame Chair, Members of the Committee, thank you for this opportunity to testify today on copyright protection. I come here today representing Broadcast Music Inc.'s (BMI's) affiliated songwriters, composers, and music publishers. It is important to realize that BMI represents the songwriter, not the performer. For example, most people have heard of the song, "New York, New York." But who wrote that song? Two songwriters named Fred Ebb and John Kander. They write songs. The same is true for Pat Alger. They don't perform. These songwriters rely upon the royalties they receive from BMI to support themselves. Pat's royalties are administered by ASCAP. Obviously, you're likely to hear a fair amount today about the plight of the small business person. I trust that you will acknowledge and embrace the fact that, as a genuine entrepreneur, the average songwriter is no less a small business owner of sorts than any tavern, inn or restaurant proprietor. Indeed, songwriters are the ultimate small business people who are able to take nothing more than an idea and transform it into something of value. This hearing today is very important in our view because it represents the first formal, public opportunity to discuss a very important breakthrough pertinent to copyright protection and music licensing that will be very welcome news for small business men and women in the hospitality industry. The breakthrough that I allude to occurred several months ago when the National Licensed Beverage Association (NLBA), BMI, and the other two performing rights organizations negotiated a compromise accord on qualifications for exemption from music licensing fees. Indeed, under this progressive but prudent agreement, the cost of doing business would improve for thousands of bars, restaurants, liquor stores and other small business 320 West 57th Street, New York, NY 10019-3790 (212) 830-2500 Fax: (212) 246-2163 Telex: 127823 provide a more efficient and economical system that will benefit songwriters and music publishers. I should, however, stress for the Committee that this initiative was a compromise. In my limited time, I would like to try to outline for you: 1) what we believe the issues are, and 2) what offers we have made in our efforts to be pragmatic without giving away something that is not ours to give away, nor anyone First, perhaps as background, I should touch on the nature of and need for what is known as public performing rights licensing. As you know, the U.S. Constitution recognizes the rights of creators of intellectual property, including those who create music. American music is beloved not just in the U.S., but around the world. The inherent property right of a musical composition (intellectual property) is no different than that of any sort of tangible property that one can see or touch and merits the very same degree of property protection. When a songwriter creates a musical work, he or she will be compensated to some extent by a record company if a recording artist uses that songwriter's creation on the album. However, the songwriter relies on public performance royalties for his or her livelihood. To simplify the concepts involved here, when a writer's copyrighted song is publicly performed, those who use that music (those who cause it to be publicly performed) must pay for the use of that intellectual property. If someone is publicly performing copyrighted music in a commercial setting, then that music user needs to obtain permission to use the songwriter's property in their business. This is no different than the use of anyone else's property in a commercial setting. For music, that permission usually takes the form of a licensing agreement. The performing rights organizations -- there are three in the U.S. (BMI, ASCAP, and SESAC) were formed for the purpose of licensing those commercial uses, on behalf of their writers and composers, and collecting license fees on their behalf for the use of that music. While this is not an exact science, our organization works to track, as closely as possible, the various venues of public performances in order to devise a fair system of licenses and subsequent payments of royalties to those whose works have been performed. It would be nearly impossible for the songwriter to identify everyone who is using music in a commercial setting, and to identify each individual composition being performed in every setting. The administrative costs for both the music user and the songwriter would drive the cost of using music sky high. Hence, the performing rights organizations offer a blanket license. A flat fee paid by the music user entitles them to use any of our works (there are over three million [3,000,000] in our repertoire alone), over radio, television, CD player, or on stage, and know that they are not infringing on the rights of any of our affiliates (BMI's affiliates include over 120,000 writers and composers). The same type of licensing, I believe, holds true for ASCAP and SESAC. It is not a perfect system, but it has worked well for the songwriter and the music user, both in the United States and worldwide. And it is a reasonable and fair method to ensure writers and composers that their works are being honored. Under the BMI consent decree, we are required to offer the same kind of license to all similarly situated users. That is, a restaurant in California which has the same music policy as a restaurant in Maine will pay the same license fee rate. The same is true for other classes of users. 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 interest groups that formed a coalition supporting the legislation introduced by Mr. Sensenbrenner H.R. 789. This bill would, in effect, |