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Mr. TAVENNER. I haven't seen that in the bill


Mr. LAFALCE. They're not in the bill, it's in the agreement.
Mr. TAVENNER. Right.
Chair MEYERS. Mr. Zeliff.

Mr. ZELIFF. Thank you. Let me ask you, Mr. Berenson, just two quick questions. Do all BMI and ASCAP members receive compensation at one time or another?

Mr. BERENSON. I would have to say, no. There are some I can't speak for ASCAP, but I will speak for BMI, that some do not because their works are not performed.

Mr. ZELIFF. But there is a fair process, there is a system?
Mr. ALGER. At ASCAP. Whoever's music is used is compensated.

Mr. ZELIFF. Can a licensee—a restaurateur, pay one of the licensing societies or do they end up usually paying more than one?

Mr. BERENSON. If the restaurateur wanted to go to the trouble to restrict themselves as to the music from one particular society, they could do so.

Mr. ZELIFF. I think what I heard Mr. Barba, and I certainly associate my comments with his, as a small business in Jackson, New Hampshire, what he's saying and what I'm trying to say, what we're trying to come up with here is what is the fair process and how can we solve this? What we're trying to figure out is what, as restaurateurs and small business owners, we need to know. What are the fees going to be and what the policy will be. If there's a serious intent here for all sides to come together. Let me just ask you in the bill, H.R. 789, is it possible to negotiate? Under H.R. 789, what percentage of your total revenues will be lost as a result of H.R. 789 passing? In other words an incidental piece. How much revenue would you lose, is it a small amount?

Mr. BERENSON. Congressman, It would be a guess on my part. I mean

Mr. ZELIFF. What would your guess be?

Mr. BERENSON. My guess would be this might have an impact in excess of 20 percent of the revenues

Mr. ZELIFF. You think it would be 20 percent? In your proposal that you tried to work out that said—you said that 70 percent of the establishments would be exempt, what do you think your lost revenue would be there?

Mr. ALGER. It would be
Mr. ZELIFF. It would be close to 20 percent?
Mr. ALGER. I think it would be sizable.
Mr. ZELIFF. More than 20 percent?

Mr. ALGER. You mean would we lose the 20 percent, with the compromise with the NLBA?

Mr. ZELIFF. I think what we're trying to say is if we eliminated all the incidental background music, you said that you'd lose about 20 percent revenue.

Mr. ALGER. Yes.

Mr. ZELIFF. I'm not going to hold you to be exact. But the second question would be is if it's 20 percent, how much would it be eliminating all incidental background music. On the proposal that you have you said getting all small properties out of the process 70 percent of the stations would be exempt, how much would that cost?

Mr. BERENSON. Again

Mr. ZELIFF. Roughly.

Mr. BERENSON (continuing). the worst mathematician there is in the world

Mr. ZELIFF. More or less?

Mr. BERENSON (continuing). would be less than the 20 percent. If it was 70 percent in theory, if all things were equal, each one played the same amount, it would be 70 percent of 20 percent.

Mr. ZELIFF. Why can't reasonable people I mean, here's an opportunity for you to save some money by supporting this bill, H.R. 789, right, and two things I think would probably need to be done in order for you to be there. One would be to accept the process of giving up the incidental revenue. The second piece is a thirdparty arbitrator, because I think that's what we're hearing. Steve Barba over here says I'm willing to pay, that's not the problem. The process is the problem. We're hearing people—and you guys can say, I guess can afford to go to New York and you can too. But there's a lot of people who can't. When the IRS comes in to audit your books how do you feel about it? You get intimidated.

Mr. BERENSON. It doesn't bother me as much as

Mr. ZELIFF. I don't want to assume that it's a regular process with any of us, but, generally people get intimidated. I think people get intimidated when you come in with a contract and you start beating people over the head saying you're going to sue them. All of sudden there's only one place to go, there's New York, and then you say, well, I give up.

Mr. BERENSON. Congressman, that's not really what happens. When they say, we're going to sue you—this is interpreted because we have to advise them. There's a court decision requiring us to do so. If we don't tell the people, the restaurateurs or any users that they could be subject to a lawsuit, we have a major problem. So, if you go to a place and it's interpreted by that restaurateur, well, if I don't take their license they're going to sue me.

Mr. ZELIFF. Well here's the problem. For 40 years we've been fighting this out. For 40 years we've been saying, well, maybe we can come to the table. Now we're talking about a legislative solution.

Maybe it would be better to have a legislative solution if you feel that you cannot do it. I think there's a chance to come together here. Forgetting about the past, can you deal with getting what's in the bill, as far as incidental music, if you can deal with that and you can come up with third-party arbitration, maybe everybody can come away from the table as happy campers. I don't know.

Mr. BERENSON. Congressman, we've met them 70 percent of the way.

Mr. ZELIFF. I think you get a better deal if you go all the way.

Mr. BERENSON. Better even yet, if we pay them to play the music, I guess.

Mr. ZELIFF. You can do better than 20 percent.

Mr. BERENSON. I don't know. I don't want to be a wise guy, but I'm just trying to say that I hope that we come to a fair process here.

Chair MEYERS. Thank you. Because we have about 4 minutes left before the vote concludes, I would like to take the opportunity to thank all of the witnesses. You have certainly helped with my knowledge and information about this entire area, and we appreciate it very much. Mr. Epperson.

Mr. EPPERSON. Mr. Berenson raised the question about—which I think I need to clarify just for the record. The church service on broadcast which is paid for by a sponsor, I think I can quite agree with him that that should be a fee paid on music like that. However, I disagree about the savings we get on the present per program license. Because on a per song basis, we're paying three to four times and as much as 10 times as much as the all music stations pay for their music. So, that's grossly unfair. Thank you very much.

Chair MEYERS. I thank you very much. This hearing—I would like to keep the record open without objection for 10 days, and this hearing is concluded. Thank you.

[Whereupon, at 12:40 p.m., the hearing was adjourned, subject to the call of the Chair.]

APPENDIX

STATEMENT OF REP. JAN MEYERS (R-KS)

CHAIR
COMMITTEE ON SMALL BUSINESS

MAY 8, 1996

“Music Licensing and Small Business"

Today's hearing is our second in a series of hearings looking at

intellectual property issues of importance to small business. The issues

surrounding music licensing practices of the performing rights societies

(ASCAP, BMI and SESAC) has long been a major concern for small

businesses in the entertainment and retailing industries. The background

music that we all hear when we are out at a favorite restaurant, a local bar or a

retail store is something that many people don't really think that much about.

Today's hearing will change all that, because how music is licensed, who pays

for it, and how many times it is paid for is going to surprise many of us.

As many of you know, music licensing under the copyright laws and the

antitrust consent decrees in effect with respect to ASCAP and BMI are issues

that are within the legislative jurisdiction of the Committee on the Judiciary.

However, the Committee on Small Business has a rich tradition of holding

oversight hearings on issues of importance to small business. In fact, in 1957

(during the 85th Congress) a subcommittee of the Permanent Select Committee

on Small Business of the U.S. House of Representatives held five days of

investigative hearings on the practices of ASCAP. The record of those

hearings covered over 700 printed pages; and, as a result of those hearings,

Members of the Committee met in executive session with representatives of the

Department of Justice, who took the matters presented at the subcommittee

hearings under consideration in their continuing enforcement of the 1950

Consent Decree against ASCAP.

Today, this issue of music licensing remains critical to many small

businesses. For example, 92% of NFIB's members have demanded music

licensing reform legislation and are firmly behind H.R. 789, the Fairness in

Musical Licensing Act. This legislation was introduced by my colleague and

friend, Jim Sensenbrenner, and I am proud to be a cosponsor. I have asked

Mr. Sensenbrenner to join us on the Committee today and take part in our

proceedings.

Despite my own strong sentiments in favor of H.R. 789, today's panel of

witnesses were carefully selected in an effort to present a balanced view of the

competing interests in this area of music licensing.

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