125,790, at 19,556 (N.D. Ca. 1985).

It wasn't until 1991 when, in a case involving a national chain store operation, the Seventh Circuit upheld a decision that the chain store was entitled to the Section 110 (5) exemption notwithstanding the legislative history relied upon by courts in previous cases. The Court specifically found that the revenues of the chain store and the fact that it was a chain of nearly 700 stores were not relevant to the analysis. Broadcast Music, Inc. v. Claire's Boutiques, Inc., 949 F. 2d 1482 (7th Cir. 1991).

The Eighth Circuit followed suit in Edison Brothers Stores, Inc. v. Broadcast Music, Inc., 954 F.2d 1419 (8th Cir. 1992). Thus, only within the last two years did any court refuse to assess Congress' intentions in dealing with the use of broadcast transmissions of music in public places.

BMI's Licensing Practices

BMI

In 1990, BMI developed new methods of communications to businesses using music in order to increase public awareness of the need to obtain permission to publicly perform copyrighted music. Such efforts have been in the form of direct mail and telemarketing in addition to telephone and in-person contacts made by our Licensing Executives. also utilizes advertising in an effort to build awareness and establish credibility about BMI and music licensing and to convey a positive, warm and friendly image. The objective is also to promote the use of music and its benefits to current and potential music users. In support of direct mail, BMI has created a number of brochures targeted to the various markets which we license. In addition, to reach this audience, BMI has published special issues of the BMI quarterly magazine "BMI MusicWorld" focusing on licensing.

BMI makes every effort to build relationships and understanding of its function and purpose by means of presentations to and seminars with centers of influence such as national trade associations and the Council of Better Business Bureaus. We have made direct presentations to and participated in seminars with the meeting planners industry, racquet sports association, Shopping Center. Mall managers, and the Annual Assembly of Better Business Bureaus. The National Council of

Better Business Bureaus has published a new Business Advisory series entitled "Music in the Marketplace Who Pays the Piper".

BMI has introduced a Licensee Service Area which specializes in responding to licensee's general inquiries concerning rates, license requirements and the like, by phone and letter. The department has its own 800 number for free direct access.

BMI has also produced many videos explaining its functions to specific industries such as the trade shows and meeting planners industry, as well as a general all encompassing video covering the multitude of industries that use music.

BMI's communication efforts focus on providing education and information to both potential music users and known music users. Following Standard Industrial Classification (SIC) economic activity groupings, BMI uses published lists of businesses to identify potential licensees.

Educational literature is developed for all possible music using industries which explains songwriters' rights and the responsibilities of businesses if music is used. BMI's direct mail campaign process involves a series of communications providing complete explanation of who BMI is, what BMI's role is in the music licensing process, and who BMI represents.

BMI's literature speaks of the particular industry's possible use of music and how this applies to the licensing process. A response device is included in the text, whether it be our 800 number and/or a survey questionnaire which assists a potential licensee in communicating to BMI the business' use or non-use of music. Letters mention the value of music and its role in many business operations. The series starts with an introductory letter giving background on the possible types of music uses by the industry BMI is communicating with, and a brief explanation of the Copyright Law requirement when music is performed publicly. The series of mailings may encompass as many as six or more letters to a potential licensee, all giving explanation about the purpose of the follow-up telephone calls and/or personal visits and the importance of meeting their obligations if music is used.

BMI,

A percentage of an industry group is contacted by telephone to research which businesses use music. Questions are posed concerning the extent of music use. If no music is used, BMI thanks the person for his or her time and this fact is noted in our database. BMI makes no further contact.

If music is used and there is sufficient information on the extent of licensable music (such as live bands and the use of recorded music on CD's records, or tapes), further information is given by BMI representatives concerning the responsibility of the business to obtain the necessary permission from those who own the music. Explanation is given on BMI's role, and further dialogue continues by answering questions on such matters as the factors involved in determining a fee. Each telemarketing representative additionally has to service the potential licensee by completing the information on the agreement and sending it to them for their signature.

All BMI contacts are based on professionalism and cordiality. Training is conducted on a weekly basis to address new issues that arise with a knowledgeable BMI representative who is trained to be both courteous and professional at all times. BMI constantly supervises the activities of the telemarketers, and monitors their calls with our service monitoring equipment. They are also trained to respond cordially even if situations arise where they may be provoked by the person being called.

As mentioned earlier, in addition to direct mail and telemarketing, BMI has a staff of approximately forty Licensing Executives in the field who call upon various locations. Visits are made only after BMI has made every reasonable effort to verify whether a location is using music and to make an appointment. In almost all cases, a series of letters has been sent to the establishment. The letters are intended to explain the value of music to the establishment, to inform the establishment as to the benefits of a BMI license and to explain to the establishment its obligation under the requirements of the Copyright Law.

BMI's Licensing Executives' contacts and presentations must follow the same philosophy as is apparent from our printed materials we

-

educate and inform. We do not intimidate, harass or abuse. If we are informed of any such conduct by a representative, BMI immediately and thoroughly investigates the claim, and appropriate action is taken, if necessary. Happily, instances of such claims have been few and far between and, to the best of our knowleage, have always been satisfactorily resolved. If the Committee has any specific information with regard to unacceptable conduct by BMI representatives, BMI would appreciate receiving the specifics so we can look into such claims.

The heart of the matter is that performing rights organizations are enforcing the law, and it is difficult to explain our function without referring to the Copyright Law. The fact is that no "fence" can be put around the public performance of our music. Given this reality, BMI does its best to explain the music user's need to comply with the obligations of the Copyright Law. At some point we may have to advise the user that the possibility of litigation is in fact the only recourse we have to prevent our product from being illegally taken from us. It seems to us inevitable that some music users will interpret these explanations as threats or intimidation. They are not so intended, and BMI constantly reviews its materials and presentations to find the best ways of conveying the information.

BMI uses every tool of communication that it can to support the Licensing Executive and prepare an establishment for a visit from the Licensing Executive. It would, we suppose, be our fondest dream that visits were not needed, that our direct mail and telemarketing were totally successful in explaining the need for permission to publicly perform music, and we received all licenses through the mail. Such is not the case, and visits are sometimes necessary. When they are made, we have made every reasonable effort possible to notify the establishment, and we do not appear out of nowhere and demand a license and a fee. Most pieces of our literature suggest to users that they consult an attorney if they have any questions, and our Licensing Executives do the same.

When our exhaustive efforts to license music using establishments do not succeed, BMI brings copyright infringement actions. Approximately 300-400 such actions are brought each year. This

represents, however, only a small fraction of the 15,000 licenses we receive each year, and an even smaller fraction of the number of establishments we are contacting during a year for license agreements.

In an effort to reduce the cost of licensing, and thereby to reduce the amount of fees which users would be responsible for, BMI will negotiate master license agreements with an association of small businesses which use music. Such an agreement is administered by the association for the benefit of its members and will usually provide for a reduced rate. BMI has had discussions with various state restaurant associations about the possibility of licensing under such a structure, and has entered into master license agreements with such industries as dance and fitness. Recently, BMI had a series of discussions with the New Jersey Restaurant Association. While BMI and the Association have not yet reached an agreement, BMI believes the negotiations showed that both parties recognized the value of music and the benefits a master license agreement can offer.

The majority of BMI's revenues are not derived from license structures arrived at unilaterally, but are a result of extensive discussion and negotiation with industry groups and associations, represented by counsel. Among the license types which resulted from this process are: Local Television; Radio; Public Broadcasting; Hotel/Motel; Background Music Service; Jukebox; Amusement Parks; Symphony Orchestras; Colleges and Universities; and Trade Shows / Conventions. These arm's length negotiations result in fees, terms and conditions which are satisfactory to both sides. of course, members of the industries are not bound by the negotiations, but the negotiation process does carry great weight because BMI is required by its consent decree with the U.S. Department of Justice to treat all similarly situated licensees in a non-discriminatory manner.

With direct reference to the effects which the Public Accommodations Exception Act might have upon BMI, we would advise you that, as a result of the Claire's and Edison Brothers decisions, which we mentioned earlier, many licenses were canceled and BMI lost in excess of a half million dollars in revenue. 'In addition, we estimate that if all performances of radio and television did not require