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provide a more efficient and economical system that will benefit songwriters and music publishers. I should, however, stress for the Committee that this initiative was a compromise.

In my limited time, I would like to try to outline for you:

1) what we believe the issues are, and

2) 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 public performing rights licensing. 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 U.S., but around the world. The inherent property right of a musical composition (intellectual property) is no different than that of any sort of tangible property that one can see or touch and merits the very same degree of property protection.

When a songwriter creates a musical work, he or she will be compensated to some extent by a record company if a recording artist uses that songwriter's creation on the album. However, 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 (those who cause it to be publicly performed) must pay for the use of that intellectual property. If someone is publicly performing copyrighted music in a commercial setting, then that music user needs to obtain permission to use the songwriter's property in their business. This is no different than the use of anyone else's property in a commercial setting. For music, that permission usually takes the form of a licensing agreement.

The performing rights organizations -- there are three in the U.S. (BMI, ASCAP, and SESAC) were formed for the purpose of licensing those commercial uses, on behalf of their writers and composers, and collecting license fees on their behalf for the use of that music. While this is not an exact science, our organization works to track, as closely as possible, the various venues of public performances in order to devise a fair system of licenses and subsequent payments of royalties to those whose works have been performed.

It would be nearly impossible for the songwriter to identify everyone who is using music in a commercial setting, and to identify each individual composition being performed in every setting. The administrative costs for both the music user and the songwriter would drive the cost of using music sky high. Hence, the performing rights organizations offer a blanket license. A flat fee paid by the music user entitles them to use any of our works (there are over three million (3,000,000) in our repertoire alone), over radio, television, CD player, or on stage, and know that they are not infringing on the rights of any of our affiliates (BMI's affiliates include over 120,000 writers and composers). The same type of licensing, I believe, holds true for ASCAP and SESAC.

It is not a perfect system, but it has worked well for the songwriter and the music user, both in the United States and worldwide. And it is a reasonable and fair method to ensure writers and composers that their works are being honored. Under the BMI consent decree, we are required to offer the same kind of license to all similarly situated users. That is, a restaurant in California which has the same music policy as a restaurant in Maine will pay the same license fee rate. The same is true for other classes of users.

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 interest groups that formed a coalition supporting the legislation introduced by Mr. Sensenbrenner - H.R. 789. This bill would, in effect, exempt commercial enterprises from paying for the use of music which enhances their business, if that music is performed via radio or television. 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. Why should a songwriter be required to donate his property to other commercial enterprises? Doesn't it seem only honest to pay for the use of this musical product? Would Congress legislate that parsley growers be required to give away to restaurants their product because parsley is only incidental to the business? The answer, obviously, is “no."

Now let me return to the agreement we reached with the National Licensed Beverage Association (NLBA) that I mentioned at the outset of my remarks. Our current agreement with the NLBA includes the following exemptions for eating and drinking establishments:

Any establishment smaller than 3500 gross leasable square
feet would be exempt;

Any establishment using 6 or fewer speakers, with no more
than 4 speakers in one room, would also be exempt;

Any commercial establishment using 3 or ver televisions of 55" screen size or smaller (with no more than 2 TVS in one room) would also be exempt.

The Congressional Research Service conducted a study on the figures in the compromise and concluded, on the basis of size alone that about 70% of the eating and drinking establishments would be exempt under this proposal. If you add in the equipment exemptions, obviously even more establishments would be exempt.

We feel we gave a great deal in those negotiations – expanding the current exemption size by 300%. To use an illustration that Committee Members or certainly your staff will understand, the venerable and fun Hill restaurant endearingly known as the Tune Inn would be exempt under this compromise. We reached this agreement in an effort to answer the pleas from the commercial users -- that the "small business” owners needed a break. We feel the compromise reached does indeed address the needs of the small businesses.

The Committee should know that along these same lines BMI, ASCAP and SESAC attempted to negotiate a compromise with the National Restaurant Association and some other members of their coalition. Our overtures to increase the size of a commercial establishment qualifying for an exemption from licensing requirements, increase the size and types of equipment, and other offers, were unacceptable to the Restaurant Association. What was even more frustrating was the NRA feedback that we received was almost a "our way or the highway" style reply. Needless to say, we have still been unable to reach agreement with that powerful trade association.

We truly hope the Committee will not lose sight of the fact that a songwriter's creative work - their intellectual property -- is private property and deserves the same protection as any other sort of property. Additionally, this copyright protection is not just domestic in nature. We should keep in mind our country's constant efforts to insist on intellectual property protection from our trading partners. If we begin to dismantle copyright protection in this country for this use of music, not only will we trigger reciprocal treatment from some of our trading partners, we risk violating international treaties to which the U.S. is a party. Additionally, we risk jeopardizing other sorts of intellectual property -- books, films, and computer software to name a few -- under a weakened copyright system.

We feel that our compromise with the NLBA is just that: a compromise. I also understand that hundreds of owners and operators of small businesses from around the country have communicated to the Congress their support for this compromise -- ranging from billiard halls to bowling alleys and clubs. These are not typical NLBA members, but rather represent a cross-section of other music users who support this compromise.

In terms of the religious broadcaster issue, we ask: why should the songwriter be denied payment for use of his property when the broadcaster either accepts advertising or sells the air time to a ministry? The broadcaster is a profit-making organization. Should creators of religious music be penalized because of the fact that they are writing religious music? We don't think so.

I hope this has helped shed some light on these issues. Thank you. I welcome any questions.

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