found in the home. ASCAP has determined that any single television measuring 36 inches or larger is not commonly found in the home.

According to both of these licensing organizations, any single unit larger than the limit they have established requires a licensing fee. To the best of my knowledge, this determination was made solely by the respective organization.

In fact, in a meeting with representatives of ASCAP in April 1993, which was arranged by Chairman Hughes, we were informed that ASCAP came to this determination based upon sales figures for television in the United States in 1990. According to their representative, 40 million televisions were sold in the United States during that year of which 2 million were 36 inches or larger.

Their information did not include where these televisions were located-home or commercial establishment-nor have they reviewed sales data since then.

It is inappropriate for the licensing groups to determine the interpretation of the homestyle exemption. A cursory review of any advertising circular from a major appliance store will show that televisions 27 inches, 36 inches or larger are regularly marketed for home use.

I also do not understand why I have to pay a license fee to these music licensing groups for my televisions. I do not use MTV, VH– 1 or any other music programming as part of my business. I have been told I have to pay for the music used in the commercials broadcast over my televisions and for the background music used on various TV programs.

This does not make sense to me. I do not receive any benefit from the music played in the commercials or in the background of television programs. These companies whose products are being sold through my TV should be responsible for the fees, not me.

For any programs that have music in the background that I receive as part of my cable TV subscription, I pay a monthly fee to my local cable company.

Our experiences in New York also demonstrate how the tactics of ASCAP and BMI make music licensing hard to swallow. For example, when I was contacted by my ASCAP representative and the required licensing of my televisions was explained, I reluctantly agreed to obtain a license. I was told how much the annual license fee would be, but when I received my license agreement in the mail, it was backdated 6 months, effectively doubling the rate I would have to pay.

My experience is not unique. The music licensing organizations avoid offering a clear definition of the homestyle exemption for us. You have to read their material very closely. Why not be straightforward in stating their policy? Then everyone would know the rules and comply instead of misleading many establishment

owners.

The fee schedules that ASCAP and BMI have imposed upon us are also unfair. The fee schedule itself is extremely arbitrary. How are these fees developed? It is hard to understand how the fees for music licensing for a typical establishment can exceed the liquor lise fee, the primary product of our establishments.

We have requested an opportunity to meet with ASCAP and BMI to discuss fees, but they are not interested in addressing this

concern.

The adoption of H.R. 3288, a limited exemption to the copyright law, will address a significant portion of our music licensing problems. It will benefit our industry, the work force, the Government, and the economy.

I thank you for your concern and consideration, and I would also like to state that I have with me John Schwott and Scott Wexler, representatives of the National Licensed Beverage Association, to answer anybody's questions.

I thank you.

Mr. EDWARDS. Thank you very much for that good testimony. We certainly will have some questions.

[The prepared statement of Mr. Leonard follows:]

PREPARED STATEMENT OF MIKE LEONARD, OWNER, GREENBAUM AND GILHOOLEY'S RESTAURANT, WAPPINGER FALLS, NY, AND EXECUTIVE VICE PRESIDENT, UNITED RESTAURANT, HOTEL, TAVERN ASSOCIATION OF NEW YORK STATE, ON BEHALF OF THE NATIONAL LICENSED BEVERAGE ASSOCIATION

Mr. Chairman and members of the subcommittee, I am Mike Leonard, owner of Greenbaum and Gilhooley's Restaurant in Wappinger Falls, New York. I am the executive vice president of the United Restaurant, Hotel, Tavern Association of New York State, and I am here today representing the National Licensed Beverage Association.

In my home state of New York, our members are constantly experiencing problems with music licensing. This has increased dramatically during the past few years, as the licensing societies have prioritized the licensing of televisions.

Our most serious problem stems from the confusion over the homestyle exemption, especially as it relates to televisions. The law provides that the exemption applies to "equipment commonly found in the home" but does not define this any further. The provision is so confusing that the two most prominent licensing organizations, ASCAP and RMI, interpret the exemption differently.

BMI has determined that any single television measuring 27" diagonally or larger is equipment not "commonly found in the home." ASCAP has determined that any single television measuring 36" diagonally or larger is equipment not "commonly found in the home." According to both of these licensing organizations, any single unit larger than the limit they've established requires a license fee.

To the best of my knowledge, this determination was made solely by the respective organizations. In fact, in a meeting with representatives of ASCAP in April of 1993, which was arranged by Chairman Hughes, we were informed that ASCAP came to this determination based upon sales figures for televisions in the United States in 1990. According to their representative, 40 million televisions were sold in the United States during that year, of which two million were 36" or larger. Their information did not include where these televisions were located--home or commercial establishment--nor have they reviewed sales data since then.

It is inappropriate for the licensing groups to determine the interpretation of the homestyle exemption. A cursory review of any advertising circular from a major appliance store will show that televisions 27", 36", or larger, are regularly marketed for home use. I also don't understand why I have to pay a license fee to these music licensing groups for my televisions. I don't use MTV, VH-1 or any other music programming as a part of my business. I've been told that I have to pay for the music used in the commercials broadcast over my television and for the background music used on various TV programs. This doesn't make any sense to me--I don't receive any benefit from the music played in the commercials or in the background of television programs. The companies whose products are being sold through my TV should be responsible for the fees, not me. For any programs that have music in the background that I receive as part of my cable TV subscription, I pay a monthly fee to my local cable company.

Our experiences in New York also demonstrate how the tactics of ASCAP and BMI make music licensing hard to swallow. For example, when I was contacted by my ASCAP representative and the requirement for licensing my televisions was explained, I reluctantly agree to obtain a license. I was told how much the annual license fee would be, but when I received my license agreement in the mail, it was back-dated six months, effectively doubling the rate I would have to

pay.

My experience was not unique. The music licensing organizations avoid offering a clear definition of the homestyle exemption for us. You have to read their material very closely. Why not be straightforward in stating their policy? Then everyone would know the rules and comply, instead of misleading many establishment owners.

This happened to one of our members, who had paid a licensing fee for more than 10 years on a simple transistor radio. One day her field representative realized that this unit was clearly within the definition of the exemption and told her that a license wasn't required. But she was not entitled to a refund for a decade of fees paid unnecessarily, based on a "sales job" done on her many years in the past. The enactment of H. R. 3288 will prevent this from taking place.

Their unsavory tactics go further than just the issue of televisions and radios. In a case I'm familiar with, one of our members met with her field representative and agreed to obtain a license agreement based upon her use of music. When her check arrived in the ASCAP district office, she was notified that it would not be cashed until the remaining fees were paid. This was confusing, since she had paid the full license fee based upon her music use. After several additional attempts to collect extra fees, an anonymous telephone call was made to the pay telephone in her place of business, which a customer answered. The caller purported to be an interested patron inquiring about the frequency of music used in this establishment. She soon received formal contact from

ASCAP, informing her that they had confirmed her extensive use of music and demanding full payment or face legal action.

Recently, BMI sent a direct mail solicitation to almost all liquor licensees in New York State. The letter tells the recipient to sign the agreement, pay the appropriate fee, and send it back to BMI. There is no option provided to indicate that music is not used or that the music used is not required to be licensed. A more recent solicitation only slightly improves on this misrepresentation. In addition, all of the license agreements sent out with the second mailing were back-dated almost six months without any explanation.

The fee schedules that ASCAP and BMI have imposed upon us is also unfair. The fee schedule is developed by each group and dictated to our industry. Under a consent decree, ASCAP's fees are reviewable by the Federal District Court in New York, but how can any one of our members mount a legal challenge against an interest group as large as ASCAP? The legal fees to do this are prohibitive. Their rate structure provides an annual rate increase based on the consumer price index, and that's in addition to any increase in their base rate, as was imposed just a few years ago. As a businessman, I understand the need to increase prices to keep up with increasing operating expenses, but I could never get away with increasing the price of my meals each year to adjust for inflation and then adding in a little extra to widen my profit margin.

The fee schedule itself is extremely arbitrary. How were these fees developed? It's hard to understand how the fees for music licensing for a typical establishment can exceed the liquor license fee, the primary product of our establishments. We've requested an opportunity to meet with ASCAP and BMI to discuss fees, but they're not interested in addressing this concern.

Mr. Chairman, restaurants and taverns in New York State alone provide more than 100,000 jobs, with an annual payroll in excess of $1 billion. They pay almost $700 million each year in local, state and federal taxes, and generate more than $4 billion dollars annual in total business activity. but our ability to continue contributing at this level is threatened by ever-increasing burdens, such as having to pay license fees to use televisions in our establishments.

The adoption of H. R. 3288, a limited exception to the copyright law, will address a significant portion of our music licensing problem. It will benefit our industry, the work force, the government and the economy.

Thank you for your concern and consideration.