ASCAP EXPLOITS ITS MARKET POWER TO THWART COMPETITIVE LICENSING The Rate Court has repeatedly found that ASCAP explicitly and deliberately uses its overwhelming market power to prevent competition with its blanket license: "The Decree was designed to limit ASCAP's ability to exert undue control of the market for music licensing rights through its control of a major portion of the music available for performance and its use of the blanket license as a means to extract non-competitive prices." Buffalo Broadcasting, slip op. at 11; Showtime, 912 F.2d at 570; United States v. ASCAP, 782 F. Supp. 778, 790-91, 811. The per-program license "serves as a counterbalance to ASCAP's market power, "ASCAP has historically been averse to offering the per-program license due to its fear that licensees would use it . . . to minimize use of ASCAP music." Capital Cities slip op. at 27 (relating Buffalo Broadcasting's findings). "Indeed, as [ASCAP's] present and former general counsels have testified, ASCAP was loath to offer a real per-program alternative, assertedly for fear that the stations would opt for a BMI blanket license and an ASCAP perprogram license and thus save themselves money by reducing the presence of ASCAP music in their programming." Buffalo Broadcasting, slip op.at 71. "Since the early 1940's ASCAP has viewed the per-program license as inconsistent with its business interests." Buffalo Broadcasting at 140. "ASCAP has long resisted the use of the per-program license in both radio and television." Id. at 142. ASCAP has made clear its "unyielding opposition to a useable per-program license." Id. at 167. "ASCAP's per-program proposal is designed to further its aim of keeping the perprogram license technically available, but practically illusory for virtually all stations." Capital Cities, slip op. at 63; Buffalo Broadcasting, slip op. at 148. Stations viewed the per program license "as illusory because it was offered at a much higher price than the blanket license and because, according to the testimony of ASCAP's own witnesses, ASCAP was loath to make it more available or affordable." Capital Cities, slip op. at 49. THE ASCAP CONSENT DECREE IS AMBIGUOUS, INEFFECTIVE, The forty-one year-old Consent Decree under which ASCAP operates is ambiguous, ineffective, and ultimately counterproductive. The Rate Court has repeatedly noted the shortcomings in the Consent Decree, which make it difficult and expensive to effectuate rational policy and a competitive outcome in music licensing: The Rate Court has found that despite the guarantees of the Consent Decree, the "inequality of bargaining power" between ASCAP and the stations (and, presumably, the difficulty and expense of obtaining relief through the Rate Court) has forced stations to accept "per-program rates that ma[k]e the license impractical for most stations," and thus, agreements negotiated with ASCAP "are not indicative of a competitive market." Capital Cities, slip op. at 60-62. In the New England Continental Media case, the Court agreed with the applicants that an incidental use fee that is independent of actual use is "eminently sensible" and that it would be "extremely difficult" for radio stations to track all incidental uses of ASCAP music, but concluded that it lacks the power under the Decree to set such a fee even when both parties propose it. Slip op. at 15-16. The Rate Court similarly noted in Capital Cities that "just because a fee structure may be reasonable does not give this Court the authority to impose it." Slip op at 75, n.33. Indeed, where such a license is not explicitly authorized by the 41 yearold Consent Decree, "if the applicants believe that the license they request furthers the antitrust goals of the Consent Decree," they have no legal recourse whatsoever; their only recourse is "to attempt to persuade either ASCAP or the Justice Department, parties to the Decree, to move this Court to amend the Decree." Id. Because the Consent Decree defines ASCAP's legal obligations through ambiguous terms such as the need to provide a "reasonable" license, and the need to provide a "genuine choice" between per program and blanket licenses, with no more explicit guidance, the Consent Decree invites decades-long, expensive, factintensive litigation that discourages music users from asserting their rights: * Our own experience confirms the Rate Court's refusal to determine ASCAP's legal obligations under the Decree absent particularized factual findings about the applicants. Despite the fact that the Decree applies to both radio and television, and despite finding that the typical station "equivalence formula" it decreed for television stations in Buffalo Broadcasting is "intuitively appealing," the Court in New England Continental Media held that it must "await the development of the record at trial" to find whether such a formula applies to the applicants. Statement of Edward P. Murphy President and CEO National Music Publishers' Association, Inc. Hearing on "Small Business Copyright Protection" House Committee on Small Business May 8, 1996 My name is Edward P. Murphy. I serve as the President and Chief Executive Officer of the National Music Publishers' Association ("NMPA"). NMPA is a trade association representing more than 600 music publishers -- businesses that own and administer copyrights in musical compositions. The Harry Fox Agency, an NMPA subsidiary, serves as licensing agent for more than 14,000 music publishers in connection with the use of music in the United States on records, tapes, CDs and on-line delivery. HFA also licenses music on a worldwide basis for use in multimedia productions, films, commercials, television programs, and all other types of audio-visual applications. Music publishers, generally speaking, are holders of copyright in musical works. The publishers' role is to nurture the creativity of songwriters and composers through artistic, professional and economic support. Some music publishers are subsidiaries of large, multinational entertainment companies. Thousands more, however, are small and medium-sized businesses, some representing the catalogue of a single writer. It is increasingly common, in fact, for writers to serve as their own publishers and to establish business enterprises for that purpose. The music publishing community has active hubs in New York, California and Tennessee, but publishers operate in every region, throughout the United States. NMPA appreciates this opportunity to provide its views on issues raised by music licensing bills currently pending before Congress, including H.R. 789. These proposals generally seek to exempt various users of music -- restaurants, taverns, certain broadcasters and others from the obligation to pay license fees for the use of musical works. The music licensing proposals, without question, would have a significant, negative impact on a principal source of income for all songwriters and music publishers income derived from the public performance of music. But the immediate threat and unfairness of denying American music creators and copyright owners the right to seek compensation for the use of their works as a matter of U.S. law is only part of the harm the proposals stand to engender. In NMPA's view, they also have serious implications for U.S. compliance with existing international obligations and for the ability of American music creators and copyright owners to continue to receive fair treatment in foreign markets. The U.S. Congress and recent Administrations Republican and have worked diligently to ensure that American music and other creative works of American authors receive adequate and effective protection in foreign markets. Key to the success of these efforts has been steps to promote our trading partners' full and fair implementation of their obligations under the Berne Convention for the Protection of Literary and Artistic Works ("Berne Convention"). NMPA believes H.R. 789 runs afoul of U.S. obligations under the Berne Convention and, if enacted, could seriously undermine U.S. efforts and credibility in seeking meaningful copyright protection abroad. H.R. 789 would, among other things, amend section 110(5) of the Copyright Act to exempt from the obligation to pay copyright royalties public performances by means of television or radio sets located in bars, restaurants and other business establishments unless a direct or indirect charge is made to hear the performances. An exemption of this breadth exceeds the scope of Bernecompatible derogations from the exclusive public performance right. Article 11 of the Berne Convention requires member countries to grant authors of musical works the exclusive right to authorize the public performance of their works and any communication to the public of the performance of their works. Article 11bis(1) makes clear that the right of communication to the public extends to "public communication by loudspeaker or any other analogous instrument transmitting by signs, sound, or images the broadcast of the work." Articles 11 and 11bis do not provide for any relevant exceptions to or exemptions from these rights. International practice condones only certain "minor |