permission, it would potentially affect a vast number of locations which we are licensing or attempting to license. This revenue is distributed to our songwriters and music publishers, whose livelihood in large part depends upon public performance royalty distributions. One must look at the magnitude of the BMI license fees for those licensees who utilize music by means of radio. Our fee in a restaurant, nightclub or similar establishment with occupancy of up to 75 is $105 a year. If the establishment has between 226 and 300 occupancy, the fee is $280 a year. If however, multiple television sets are used, their fee is 35% higher. Our fee in a retail store or other commercial establishment is based upon square footage: $60 a year for up to 1,500 square fee, with a graduated fee of up to $480 a year for over 5,000 square feet. Fees for audiovisual uses are somewhat higher. Thus, a user has access to all of the over 2,500,000 songs created by BMI's affiliates, and can use this music to enhance and make more profitable his or her business, for about 30¢ a day in a restaurant and 15¢ a day in a store. This is truly a modest sum for music which enhances one's business

I hope that these remarks have help to give some insight into the types of licenses and BMI's methods of licensing music for public performance. I welcome any questions you may have.

Mr. HUGHES. Mr. Candilora, welcome.

STATEMENT OF VINCENT CANDILORA, PRESIDENT AND CHIEF OPERATING OFFICER, SOCIETY OF EUROPEAN STAGE

AUTHORS AND COMPOSERS (SESAC)

Mr. CANDILORA. Thank you. On behalf of SESAC, I would like to express our appreciation to Chairman Hughes and to all the members on the subcommittee for the opportunity to submit this statement.

SESAC was founded in 1930 by Paul Heinecke, and is one of the few privately owned performing rights organizations in the world. A little over a year ago, SESAC was acquired by Stephen Swid, Freddie Gershon, Ira Smith, and the investment banking firm of Allen & Co.

Under the direction of Messrs. Swid, Gershon, and Smith, SESAC continues to fulfill Mr. Heinecke's mission more than a half century later by finding, developing and protecting the rights of creative talent out of the mainstream of contemporary music capitals.

Today, SESAC represents some 2,500 writers and publishers and 160,000 musical compositions of all types. SESAC licensing practice and its plans for future licensing, I would like to touch on.

SESAC licensing is separated, as you've heard both ASCAP and BMI stated, into two areas, into the general area and the broadcast area, and we have also included a telecommunications areas. Broadcast licensees include commercial, public and noncommercial radio and television stations. Telecommunication licensees include basic and pay cable programming services, digital cable radio services, and satellite delivered services. Performances and other media fall under the general licensing department.

Although it is a music users responsibility under the law to obtain advance authorization for public performances of music, in almost all cases the initial contact is made by SESAC.

Currently, SESAC broadcast and general licensing efforts are conducted from its headquarters in Nashville, TN. SESAC's licensing representatives are each responsible for researching and licensing facilities in a given territory. An introductory mailing includes a license, a brochure or flyer describing SESAC, and a cover letter generally outlining the establishment's obligation under the copyright law. Followup phone calls are made and additional letters are sent if necessary. The subsequent contacts are usually educational in nature and may include copies of the Copyright Act and citations to case law.

SESAC employees are frequently reminded that SESAC enters into long-term relationships with prospective licensees. It is therefore extremely important that the representative conduct himself or herself in a professional, courteous and cooperative manner at all times.

Most business owners want to do the right thing under the law, and after receiving information on the copyright law willingly enter a license. Unfortunately, owners and operators of some businesses remain adamantly opposed to music licensing. If the numerous

1

phone calls and letter prove unsuccessful, the facility is sent a certified letter warning that performance of SESAC music will constitute copyright infringement, and setting forth the remedies that may be ordered.

Monitoring to detect unauthorized performances follow, and additional attempts are made to license the facility. SESAC uses copyright infringement litigation only as a last resort to protect the rights of its writers and publishers. As a general rule, SESAC representatives negotiate with operators of individual facilities. However, its rate schedules and terms are consistent for license types. For example, all theaters with the same number of seats pay the same license fee.

SESAC rates are based upon market factors directly related to the industry and are reviewed on an annual basis, and adjusted if changes in the license fee factors have occurred.

SESAC and its employees are active members in many trade organizations and associations including the National Association of Broadcasters, National Religious Broadcasters Association, State broadcast associations, the American Hotel and Motel Association, the International Association of Auditorium Managers, et cetera.

For several decades, SESAC has licensed well over 90 percent of the broadcast industry, both radio and television. Like performing rights organizations all over the world, SESAC primarily uses blanket licenses. The flexibility, comprehensive coverage, and ease of administration of this type of license remain the key reasons for its popularity and widespread use.

SESAC's broadcasting license fees are not tied directly to a station's revenue, but are based upon the size of a station's market, the potential audience, and the spot advertising rates charged by the station. This assures that large and small market stations, and high-rated and low-rated stations are treated fairly vis-a-vis one another. Through the years SESAC has tried to work smoothly with broadcasters, and to listen and respond to their licensing

concerns.

In response to often-heard comments from broadcasters in mid1993, SESAC announced a new licensing model. In early 1993, entered into an exclusive agreement with Broadcast Data System or BDS. BDS owns the technology used by Billboard Magazine that tracks the airplay of records and songs to determine their position on the popularity charts.

Songs released on compact disk are loaded electronically into the BDS system, and a digital footprint or thumbprint if you like of each song is created. The loading of the record into the system and the creation of the thumbprint do not alter the actual recording so that there is no effect on the recording, there is no effect to the quality of the recording or interference with the product in any

way.

BDS places monitoring devices in radio markets that are capable of listening to several radio stations at one time. The digital thumbprint in the BDS system is matched against the on-air broadcast, and then that is tracked to the actual performance of the song.

BDS then reports that information to SESAC. BDS and SESAC have been testing this technology on Spanish-language format stations for several months. SESAC plans to go live with the system very soon. For the first time payment for music licensing will be based upon actual performances, so that a station's monthly license fee will vary according to the amount of SESAC music performed. SESAC general licensing department is responsible for licensing performances of music in areas other than radio and television. Currently, license types includes hotels, restaurants, nightclubs and taverns, colleges and universities, background music services, airlines, theme parks, sports teams, stadia, theaters, auditoriums and concert hall, and funeral homes.

As with broadcast licensees, license fees for general licenses are based upon factors relevant to their business. For hotels, the fee is based upon live or mechanical music use, the number of rooms and the room rates. College fees are based on enrollment; theater fees are based on seats; theme parks are based on paid attendance.

In recent years, SESAC has had productive discussions with trade associations and groups. Those discussions have been informative and beneficial, and SESAC is always willing to discuss an industry's concern with industry leaders. SESAC is currently working with a group of convention and meeting planners with the goal of making music licensing for such events easier.

Finally, I would like to make a comment on H.R. 2388. I have in my statement, referring to Herbert v. Shanley as Marvin had mentioned Justice Holmes said that if music did not pay, it would be given up; if it pays, it pays out of the public's pocket. Whether it pays or not, the purpose of employing it is profit, and that is enough.

Morton mentioned an analogy about bread, and how you certainly wouldn't ask the bakers to provide free bread to all of the establishments. I thought about that, and thought perhaps a better analogy would be parsley. We see it most of the time when we sit in a restaurant. It is part of the presentation of food, and yet no one really engages in eating it, and yet someone grows it, someone sells it, and it is used to add to the ambiance of the restaurant and the food.

SESAC submits that the principle set forth in Justice Holmes' opinion applies today. Establishments may and do benefit from performances of copyrighted works on premises as the establishment receives a benefits from using copyrighted works. It is only fair that the creators and owners of the copyrighted works receive compensation.

The current copyright law is carefully thought out and crafted, balancing the interests between both the users and the owners of copyrighted works. I am grateful to the committee for this opportunity to summarize SESAC's licensing activities, and to express its comments.

Mr. HUGHES. Thank you, Mr. Candilora.

[The prepared statement of Mr. Candilora follows:]

82-244 O-94-4

PREPARED STATEMENT OF

VINCENT CANDILORA, PRESIDENT AND CHIEF OPERATING OFFICER, SOCIETY OF EUROPEAN STAGE AUTHORS AND COMPOSERS (SESA)

SESAC, Inc. hereby expresses its appreciation to

Representative William J. Hughes, Chairman, and to all the members of the Subcommittee on Intellectual Property and Judicial Administration of the Committee on The Judiciary of the United States House of Representatives for the

opportunity to submit this statement.

I. SESAC BACKGROUND

SESAC was founded in 1930 by Paul Heinecke, a German immigrant and American citizen. In his twenties, Mr. Heinecke had been the American Manager of Breitkopf and Hartel, the largest European publisher of music in the world. He paved the way for American performances of "Sibelius' Finlandia" and "Valse Triste," "Ponce's Estrellita" and "Provost's Intermezzo" as well as the music of modern composers such as Arnold Schoenberg and Frederick Delius. He formed SESAC to represent the unrepresented composer and author. In its early years, SESAC was known as the Society of European Stage Authors and Composers that connotation was discontinued nearly 60 years ago as the SESAC repertory became overwhelmingly Americanized. became and is a well known trade name in the music industry.

SESAC

SESAC, the only privately-owned performing rights

organization in the world was acquired by Stephen Swid,