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utable to the entire program period whether we play 1 song or 20 songs.
Are we charged the same rate as stations that play music all day long? No. If we try to use the per program license offered today and we play 1 hour of music they would charge us for 3 or 4 hours. Thus, if more than one-third of our programs contain copyrighted music we could end up paying more than the rock and roll station across the street that broadcasts music 24 hours a day.
There's also an absurd amount of paperwork ASCAP and BMI requires to produce for the right to have our version of a per program license. We must log every single song we play 24 hours a day, 7 days a week. These reports must be sent to ASCAP and BMI each month, and they must be 100 percent accurate or we are subject to substantial monetary penalties. It's just another obstacle, another disincentive to using the per program license.
Why would anyone treat their customers this way, when we've just heard that a composer wants us to play their music? Well, it's a good question. ASCAP and BMI do it because it's simpler and more lucrative to force as many stations as possible to buy the blanket license and they are after all monopolies. They get away with it because there's no competition. We have nowhere else to go to shop for their music.
I have to tell the members of this Committee that our broadcasters deeply resent this unfair coercive system and respectfully implore Congress to pass H.R. 789 this year. Religious broadcasters in particular are beginning to view the obstructive stance of ASCAP and BMI as part of a larger battle with the entertainment industry.
We think to ourselves, every time we pay a religious artist, they get paid once, yet we are forced to pay AŠCAP and BMI three or four times. What's going on? Where's our money going? Does it fund acts that are morally offensive to our listeners and to most other Americans?
Religious broadcasters, classical music broadcasters, and talk radionone of whom use much of ASCAP's and BMI's productwould be grateful for your help in passing this bill. We are not anticopyright. We are not antisongwriters. We want to encourage religious songwriters. We merely want to pay for what we play. Again, Madam Chair and members of the Committee, thank you for your attention to this difficult issue.
[Mr. Epperson's statement may be found in the appendix.]
Chair MEYERS. Thank you very much, Mr. Epperson. Our next witness is Mr. Berenson, and he's with us today on behalf of BMI. He is the Senior Vice President and General Counsel. Mr. Berenson. TESTIMONY OF MARVIN L. BERENSON, ESQUIRE, SENIOR VICE
PRESIDENT AND GENERAL COUNSEL BMI Mr. BERENSON. Madam Chair, Members of the Committee, thank you for this opportunity to testify today on copyright protection. I come here today representing BMI's affiliated songwriters, composers, and music publishers. It is important to realize that BMI represents the songwriter, not the performer. For example, most people have heard of the song, "New York, New York. I would ask
people sitting up there, who wrote it? Probably very few people would be able to respond with the correct answer. The answer is Fred Ebb and John Kander. They write songs. They don't perform. These songwriters rely upon the royalties they receive from BMI to support themselves.
You have heard and will probably continue to hear a fair amount about the plight of small business people. I trust that you will acknowledge and embrace the fact that as a genuine entrepreneur, the average songwriter is no less a small business owner than any tavern, inn, or restaurant proprietor. Indeed, songwriters are the ultimate small business people who are able to take nothing more than an idea and transform it into something of value.
This hearing today is very important, in our view, because it represents the first formal public opportunity to discuss a very important breakthrough pertinent to copyright protection and music licensing that will be very welcome news for the small businessmen and women in the hospitality industry. The breakthrough that I allude to occurred several months ago when the National Licensed Beverage Association, BMI, and the other two performing rights organizations negotiated a compromise on qualifications for exemptions for music licensing fees. Indeed, under this progressive but prudent agreement, the cost of doing business would improve for thousands of bars, restaurants, liquor stores, and other small business establishments that play radios and televisions for the enjoyment of their customers. I should, however, stress that this initiative was a compromise. It's important to remember.
In my limited time I would like to outline for you the following: What we believe the issues to be, and what offers we have made in our efforts to be pragmatic without giving away something that is not ours to give away, nor anyone else's to take away, a person's intellectual property.
First perhaps as background, I should touch on the nature of and need for what is known as a public performance license. As you know, the U.S. Constitution recognizes the rights of creators of intellectual property, including those who create music. American music is beloved not just in the United States, but around the world. The inherent property right of a musical composition is no different than that of any sort of tangible property that one can see or touch and merits the same degree of property protection.
The songwriter relies on public performance royalties for his or her livelihood. To simplify the concepts involved here, when a writer's copyrighted song is publicly performed, those who use that music must pay for the use of the intellectual property. If someone is publicly performing copyrighted music in a commercial setting, then that music user needs to obtain permission for the use of songwriter's property. This is their property. This is no different than the use of anyone's property in a commercial setting. For music, this normally takes the form of a licensing agreement.
It would be nearly impossible for the songwriter to identify everyone who is using his music in a commercial setting, and to identify each of the songs that are being performed. The administrative costs for such an undertaking would drive the costs of licensing music sky high. Hence, the performing rights organizations offer what is commonly called a "blanket license.” That is a flat fee paid
by the music user which entitles him to use any of the works in our repertoire—which in BMI's case is approximately 3 million works-over radio, television, CD players, stage, and know that they are not infringing on any of the rights of any of our affiliates.
It is not a perfect system, as previously testified, but it has worked well for the songwriter and the music user, both in the United States and worldwide. This is a system that's used in every other country that has a copyright regime. BMI and ASCAP are required under their consent decrees to basically treat similarly situated users the same. That is, a restaurant in California will pay the same licensing fee rate as that of a restaurant in Maine.
During a good part of last year, under the aegis of the House Judiciary Committee, we along with ASCAP and SESAC, met with members of interested groups that formed a coalition supporting the legislation introduced by Mr. Sensenbrenner. This bill would, in fact, exempt commercial enterprises from copyright liability for music which enhances their business, if that music is performed via television or radio. Enactment of H.R. 789 in its present form would deny songwriters and composers a large portion of their livelihood, while allowing restaurateurs the use of this property for free. I ask, and this is suggested by means of example regarding the claim that music is incidental to the restaurant business, that parsley I think, was mentioned before as incidental to the restaurant business. Everyone's gone into a restaurant, you get your plate, your dinner's on it, and there's a piece of parsley sitting on there. I would venture to say very, very few people eat the parsley. But would Congress say, "Well, since parsley is incidental to the restaurant business we should legislate that parsley growers should be forced to donate the parsley to the restaurant for nothing?” I would think not.
But let me go into the agreement which-let me go into the agreement which was reached with the National License Beverage Association, and that is as follows: Any establishment smaller than 3,500 gross leasable square feet would be exempt, no matter what they had in there. If we had a hundred speakers and hundred televisions, if the establishment is less 3,500 square feet, they don't have to pay a license fee.
Any establishment using six or fewer speakers with no more than four speakers in one room, would also be exempt, if it was over 3,500 square feet.
In an establishment-eating and drinking establishment using six or fewer speakers with no more than four speakers in any one room, would be exempt.
Any commercial establishment using three or fewer televisions of 55 inch screens, that's a large TV, with no more than two televisions in any one room would also be exempt.
This is the basis of a settlement that was reached with the National Licensed Beverage Association. The Congressional Research Service conducted a study on the figures in this compromise and concluded on the basis of size alone, just that 3,500 square feet aspect, about 70 percent of the eating and drinking establishments would be exempt under this proposal. If you add in the equipment exemptions, meaning the size of the screens and the number of speakers, even more establishments would be exempt.
We, the performing rights organizations did a lot. We increased the current exemption by a little more than 300 percent.
Now, we have attempted, meaning BMI and I know ASCAP and SESAC, have attempted to negotiate an agreement with the National Restaurant Association and some other members of the coalition. Our overtures to increase the size of commercial establishment qualified for exemption from licensing requirements, increase the size and types of equipment and other offers, were unacceptable to the NRA. What was even more frustrating was the NRA feedback that we received was almost a "our way or take the highway" style approach. They wanted to legislate. They did not want to compromise. Needless to say, we have still been unable to reach an agreement with that powerful trade association.
I would like to just make mention, and I'm almost done, the fact that if H.R. 789 were to pass, it would have implications internationally. We are members of the Berne Convention which requires copyright protection, and if we were to pass something such as this, we have proof from some performing rights societies that they would probably go to the WTO and claim that we would be in violation of our treaty obligations.
Now, I would like, if I could, to just address something that Mr. Epperson said, and Mr. Epperson and I have known each other for a lot of years, too many years. In terms of the religious broadcaster issue, we ask why should the songwriter be denied payment for his property when the broadcaster either accepts advertising or sells air time to a ministry? The broadcaster is a profit-making organization. Should creators of religious music be penalized because of the fact they are writing religious music? We don't think so.
I would like to address, if I may, one of the comments that was made by Mr. Epperson, namely, that there should be a per program license alternative and that it should be an economic alternative.
Prior to today's appearance, I looked at some of the same stations which Mr. Epperson is associated with. Most of the stations operate on a BMI per program license. Without giving specific numbers of the license fees, unless Mr. Epperson agrees that I can publicly disclose them, and taking only a few of the stations, WYLL located in Illinois averaged a savings by using the per program license of over 62 percent of what they would have paid on the blanket license fee. Another station, KFEX-AM California, averaged a savings of over 83 percent of what they would have paid on the blanket license fees. KBAR-AM averaged a savings of 42 percent. WMCM-AM in New York, excuse me, New Jersey, sorry, averaged 91.8 savings over the blanket fees by using the BMI per program. It is definitely an economic alternative and is a viable one. You can't get much more of a savings than 91.8 percent, unless you get it for nothing
I hope that I have helped shed some light on these issues and I welcome any questions that you have.
[Mr. Berenson's statement may be found in the appendix.]
Chair MEYERS. I'm sure there will be questions, Mr. Berenson. Our final witness today is Mr. Tavenner. He is with us today from just up the road, in Olney, Maryland. He runs a restaurant named the Silo Inn and is appearing today on behalf of the National Restaurant Association. Mr. Tavenner.
TESTIMONY OF TOMMY TAVENNER, PRESIDENT, SILO INN
Mr. TAVENNER. Thank you, Madam Chair and distinguished members of the Committee, thank you for having me here today.
My name is Tommy Tavenner, and I do indeed own the Silo Inn in Olney, Maryland. My dad opened a restaurant back in 1965, 31 years ago, when Olney wasn't a whole lot more than a single intersection. As the town grew up around us, we grew too. We now have about 50 employees at our restaurant and pub. I am testifying today on behalf of the members of the National Restaurant Association.
First, let me say that I'm a musician and an amateur composer myself. I wish I could say I have gotten far enough to be licensed with ASCAP or BMI, but I haven't. Hopefully, some day like Congressman Bono, I'll have my own hit song.
I've paid licensing fees to ASCAP and BMI for nearly 30 years now. For 2 nights of live music a week, we pay more than $2,400 a year, considerably higher than a $1.50 a day. Sometimes I feel like the biggest fool in Maryland. I have no idea what I'm paying for or why I pay for what I pay. I have a file as thick as an encyclopedia showing my efforts to understand the rates. Included in that file are what I call "the New York lawyer letters." Letters threatening me with lawsuits for failing to pay what I'm told to. It's a strange way of doing business. Unfortunately, current law appears to let the music licensers get away with it.
"Scam" is a harsh word to use, but I've heard enough to convince me it's not inappropriate for describing what is happening to us in the small business community. Let me share a few stories, including some from colleagues who have taken time to be with us today, two colleagues from Virginia, Tom Jackson, who owns Shooter McGees in Alexandria. It took him 3 years and the lawyer to finally prove to BMI that he shouldn't have to pay for karioke, a dance floor, and a 200 seat restaurant; because he doesn't use karioke, doesn't have a dance floor, and seats only 70 people.
Let's take Calvin Scvillee from Whitey's in Arlington. When the ASCAP representative first visited him and told him what he owed he said, "Fine." Then he asked for a written bill. The ASCAP representative wrote down a bill on a napkin and handed it to Calvin. Although ASCAP and BMI have spent thousands of dollars on ads trying to convince you these problems don't exist, they do.
Litigation threats and abusive collection I've cited are real. I did not make them up. They actually happened. In fact, they are happening every single day in small businesses around the country.
That's why 2 years ago the National Restaurant Association joined with a broad coalition including the National Retail Federation, the NFIB, and others to ask Congress to make some changes.
Our courts of law recognize that whenever a handful of companies control one market, there's a potential for abuse. That's why ASCAP and BMI currently operate under court orders. Unfortunately, however, the last 40 years have shown that these orders don't provide any real protection.
If you don't understand the fees, if you object to being charged one fee while the business down the street is paying a wildly different rate, or if you can't get a straight answer about what each