IV. SESAC'S RE-EMERGENCE HIGHLIGHTS THE NEED FOR ASCAP AND BMI REFORM. The third performance rights organization, SESAC, has been reinvigorated in recent months under new leadership. The direction SESAC is proposing, based direct competition with ASCAP and BMI and on new technological methods of music identification, is an exciting alternative to the ASCAP and BMI approach in many respects. However, in the absence of significant reform in ASCAP and BMI practices, SESAC will become not an opportunity, but an additional burden. SESAC's emergence provides Congress with both an opportunity and an excellent example of the need for reform. A. SESAC's New Approach. SESAC has stated that it intends to establish a catalog of composers and publishers in niche markets. Its first target market is Hispanic music. It has announced plans to offer a revolutionary per use license. SESAC Users will not be required to report music use. will use an automatic monitoring device that will listen to all licensees, and use known "fingerprints" to recognize music. In a reversal of the ASCAP and BMI approach, the SESAC system will report all known music use to the station as part of the service, and will bill automatically. SESAC has stated that it will make its repertory publicly available in a usable way. B. ASCAP and BMI Practices Must First Be Reformed. SESAC's plan might presage a new era marked by competition and service to users rather than monopolization in music licensing. Or it might be the birth of a new monopolist that will serve little purpose other than creating a third licensing organization that must be paid with no relief for users. The key is whether ASCAP and BMI are required to offer a real alternative to the blanket license that is beneficial to all users and that allows competitive sources of music licensing to develop. If ASCAP and BMI are permitted to continue as they have, increased use of SESAC music in a niche market will not lead to a reduction in ASCAP or BMI fees. Rather, the historical pattern will repeat: ASCAP and BMI will again negotiate a blanket license and a worthless per-program license with the broadcasters' committee of their choice. Because loss of a niche market will have little impact on ASCAP's or BMI's overall repertory, and because that committee will act for the interests of its overwhelming majority, the reduction of ASCAP or BMI repertory in the niche market will be given little significance in the negotiations. Stations in the niche market will still need ASCAP and BMI blanket licenses. to risk its negotiations on issues of greater importance to the largest group of its stations in order to force ASCAP to comply with its obligations under the Amended Final Judgment. The RMLC recognized the divergence of interests in the radio industry and that it was not the representative of all interests. In a September 28, 1990 letter to ASCAP, the RMLC advised ASCAP that "the radio industry is extraordinarily diverse and there may be certain stations (such as those represented by the Religious Broadcasters' Committee) whose interests are not represented by the [RMLC]." Early in the process, in August, 1990, our Committee sought to join in the negotiations, to satisfy ASCAP's desire for a single, industry-wide negotiation. ASCAP refused, stating that "industry-wide negotiations would be greatly complicated by the presence at the table of other parties." ASCAP did note that if the RMLC wanted to invite our Committee, it would reconsider its position. The RMLC, pursuing its own stations' interests, told ASCAP that it did not represent the entire industry, but reasonably concluded that it would prefer to continue to negotiate alone with ASCAP. Throughout this period, ASCAP knew, from years of communications and pending litigation, of our position with respect to the blanket and per-program licenses. ASCAP also knew that with respect to those licenses, our interests On top of that, they will be required to pay growing amounts to SESAC. Alternatively, if ASCAP and BMI licensing practices are reformed, the following could occur. SESAC offers stations a competitive alternative for music licenses. As use of SESAC music increases, use of ASCAP and BMI music will necessarily decrease. If fees are reasonably related to the amount of music used, and the organizations are required to identify their music, stations will have an opportunity to select the music of the organization with which they want to deal. This is the essence of competition BMI have fought from the start. competition that ASCAP and One scenario is a more competitive music licensing industry. The other, a further monopolistic burden. History has shown that neither ASCAP nor BMI will take a step toward enhanced competition voluntarily. We urge Congress to make sure that this opportunity for real reform is not missed. V. PROPOSALS FOR CONGRESSIONAL ACTION Based on the foregoing, we ask Congress to consider several actions. While many of the principles of the ASCAP Amended Final Judgment and BMI consent decree are sound, the obligations on the performing rights organizations should be strengthened by law, and a direct right of action should be provided to users who are prejudiced by their failure to comply with their obligations. Among the most important points that need law, and the burdens caused by use of the alternative should be minimized; b. the obligation to provide real-time, on-line access to the titles in their repertory and relevant information concerning the copyrights of those c. the obligation to negotiate with all interested We also ask the Subcommittee to consider the effects of ASCAP's and BMI's enforcement activities. Ideally, we believe that collective enforcement activities should be separated from collective licensing. This would be a simple correction, that would ensure that the enforcement and collective licensing powers are not abused. Alternatively, |