Freddie Gershon, Ira Smith and the investment banking firm of Allen & Co. in 1992. Mr. Swid is Chairman and CEO of SCS Communications which owns and operates diverse media

properties including a scholarly book publisher and SPIN, a music and youth culture magazine. He is also an independent film producer. Mr. Swid was formerly Chairman and CEO of 3BK Entertainment World, a worldwide entertainment services company and the largest privately owned music publisher in the world. Until July 1986, he was founder, co-chairman and co-chief executive officer of Knoll International Holdings Inc., one of the nation's largest privately held manufacturing companies. Mr. Swid is a member of the Council on Foreign Relations, a Director of the Institute for East West Studies and a Trustee of the Solomon R. Guggenheim Museum. Mr. Gershon, an entertainment attorney, has represented many of the most prominent stars in the music industry. He also served as counsel to the Stigwood Group ("Jesus Christ Superstar"), was intimately involved in the production and financing of a number of successful motion pictures, plays and soundtrack albums and is the author of a best-selling novel. Mr. Gershon currently serves as Principal, Chairman and CEO of Music Theatre International, one of the largest and oldest grand rights licensing organizations for musicals. An attorney formerly in private practice, Mr. Smith is Vice Chairman and CEO of the Alexander Doll Company which he and a partner acquired

from the founder, Madame Alexander. He has served as CEO of Music Theatre International and is now responsible for its worldwide financial operations. Mr. Smith was engaged in the financing and production of motion pictures including "Amityville II: The Possession", "Conan, the Barbarian", "King of Comedy" and many others. He began his career as a trial attorney at the Securities and Exchange Commission.

The trio has brought a new entrepreneurial spirit to SESAC as well as a desire to seek out and enter creative and alternative licensing schemes. 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.

II. SESAC LICENSING PRACTICES

The following is a brief outline of SESAC's licensing practices and its plans for future licensing. SESAC's licensing is separated into general, broadcast and telecommunications areas. Broadcast licensees include commercial, public and noncommercial radio and television stations. Telecommunications licensees include basic and

pay cable programming services, digital cable radio services and satellite delivered services. Performances in other media fall under the general licensing department.

Although it is a music user's 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's broadcast and general licensing efforts are conducted from its headquarters in Nashville, Tennessee. 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 an establishment's obligations under the copyright law. Follow-up phone calls are made and additional letters are sent if necessary. These subsequent contacts are usually educational in nature and may include copies of the Copyright Act and citations to case law.

Most

SESAC's 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. 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. After numerous phone calls and letters 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 follows 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 theatres with the same number of seats pay the same license fee. SESAC's 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, the National Religious Broadcasters association, state broadcaster associations, the American Hotel and Motel Association, International

Association of Auditorium Managers, International Association of Exposition Management, American Society of Association Executives, International Association of Conference Centers, International Association of Music Parks and Attractions, National Restaurant Association, Country Music Association, National Academy of Recording Arts and Sciences and many others.

III. SESAC RADIO AND TELEVISION LICENSING

For several decades, SESAC has licensed well over ninety percent of the broadcasting industry, both radio and television. Like performing rights organizations all oveṛ 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 revenues, but are based upon the size of the station's market (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.

the years, SESAC has tried to work smoothly with

Through

broadcasters and to listen and respond to their licensing

concerns.

In response to often heard comments from broadcasters, in mid-1993, SESAC announced a new licensing model. In early 1993, SESAC entered into an exclusive agreement with Broadcast Data Systems or BDS. BDS owns the technology used by Billboard Magazine that tracks the airplay of records and songs to determine their position on popularity charts. Songs released on compact disc are loaded electronically into the BDS system and a digital footprint of each song is created. The loading of the record into the system and the creation of the footprint do not alter the actual recording so that there is no diminution of or interference with the quality of the recorded product. BDS places monitoring devices in radio markets that are capable of "listening" to several radio stations at one time. The digital footprint in the BDS system is matched against the on-air broadcast that have been monitored to track actual performances of songs. BDS then reports that information to SESAC.

SESAC and BDS have been testing the BDS technology on Spanish language format stations for several months. SESAC plans to go live with the system 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 believes that this technology will prove to be a viable alternative to present licensing practices.

SESAC