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tiations prove fruitless. As explained more fully below, BMI is willing to have a requirement for the arbitration of the fees for the retransmission of compositions in its repertory imposed by statute.
(e) In the field of music licensing, procedures for the distribution of royalties among individual copyright owners have long been in effect. We believe that it would be improper in principle and unworkable in operation to impose upon the Register of Copyrights the duty of dividing payments for all classes of copyrighted works among many thousands of individual copyright owners when the machinery for such distribution already exists. BMI has always assumed full responsibility for distributing the fees received by it to its affiliated writers and publishers.
What the CATV systems want is the right to retransmit musical material picked up from broadcasting stations. We stand ready to give them the same rights that those stations have in that same material. This should satisfy all of the needs of the CATV operators.
II. BMI seeks less rather than more regulation with respect to the use of copyrighted material by the burgeoning cable industry. It seems obvious to us that the best soltuion, not only for authors and publishers, but for CATV, is for CATV systems to have access to the musical repertories for all purposes, both retransmission and origination, on a fair basis. That solution begins with a very simple stepnegotiation marked by fairmindedness and good will on the part of all participants.
BMI believes that it can successfully negotiate fair, voluntary agreements with CATV operators on a nondiscriminatory basis. It is a fundamental concept of the American free enterprise system that the fairest and most successful method of arriving at a reasonable agreement is negotiation between the parties. A departure from that tradition is not warranted with respect to the performance of music. BMI is certain that serious negotiations between music licensing organizations and CATV operators would be productive.
All performing rights organizations have sought to conclude negotiations. They have tendered court fixation or arbitration of rates of CATV operators. BMI reiterates its offer to submit the issues involved to binding arbitration if negotiation does not prove fruitful. BMI is willing and, indeed, is required by consent decree, to tender nondiscriminatory licenses to all music users. It is willing to tender CATV such licenses in form similar to that which has been acceptable to all other classes of music users.
BMI would be willing to have a requirement imposed upon it for the compulsory arbitration of the fees for the retransmission of the compositions in its repertory. A statutory provision for such arbitration, as opposed to the present proposals of the copyright revision bill, could be limited to the music performing rights organizations who are certified by the Register of Copyrights as having their repertories substantially performed by the broadcasters who constitute the primary transmitters in the United States. Indeed, BMI is ready to permit CATV systems to utilize the music licensed by it during any period of negotiation or arbitration.
In summary, BMI believes that the drastic remedies of statutory fixation of compulsory license rates, coupled with bulk payment to a government official for distribution to the individual copyright proprietors of all classes of copyrighted works is unnecessary and inappropriate insofar as the licensing of music is concerned.
The problem of payment for musical compositions utilized by CATV is not an inter-industrial conflict; it is a problem of livelihood for thousands of creative writers, the encouragement of whose activity has been constitutionally recognized as essential to the public interest. These writers are solely motivated by the desire to cooperate to the utmost with any user of their works who is ready to compensate them fairly.
COMMENTS OF BROADCAST Music, INC., TO THE SUBCOMMITTEE ON PATENTS, TRADEMARKS AND COPYRIGHTS OF THE JUDICIARY COMMITTEE OF THE U.S. SENATE
(January 20, 1972) Broadcast Music, Inc. (BMI) welcomes the opportunity to respond to the letter of Thomas C. Brennan, Esq., Chief Counsel, dated December 15, 1971. It will concentrate its comments on "whether any particular type of program material, such as music or professional and collegiate sports, requires separate treatment in the cable section of the copyright bill.”
BMI is a music performing rights licensing organization. Our copyright law specifically provides for the protection of the right publicly to perform music for profit and it is only through BMI and organizations similar to it that this right can successfully be implemented. BMI's sole function is to license to music users of every class and type the right to give non-dramatic public performances of copyrighted musical compositions for profit. Affiliated with BMI are approximately 25,000 composers and lyricists and approximately 9,000 publishers. These are all wholly independent. They convey to BMI no rights in their musical compositions, other than the performing right.
In addition to making available to music users all the works of its affiliated writers and publishers, BMI, through reciprocal contracts with more than thirty foreign performing rights organizations, makes similarly available music of the rest of the world. Almost without exception, all of BMI's licenses to approximately 27,000 music users in the United States are non-exclusive "blanket" licenses which permit the licensee to perform the entire repertory of BMI without individual clearance or permission. BMI divides all of the money it collects, except for its expenses and necessary reserves, among the writers and publishers whose works it represents.
The licensing of the right to perform non-dramatic musical compositions publicly for profit is unique. Section 111 of S. 644 was designed to meet certain specific problems which CATV operators feared would restrain the proper growth in the public interest of CATV systems. All of these problems have been solved by a system of licensing which has, for decades, operated, not only in the United States, but all over the world and which serves the needs of all of the industries which utilize musical performances for profit. No other system than the one which has been so patiently evolved can properly meet the true needs both of the writers and publishers of music and of CATV operators.
The questions which the CATV owners raised and which are inapplicable to music licensing are :
1. Unlike every other type of program material, no problems of exclusive rights are involved in music licensing. The rights granted to all users of music by BMI and its competitors are non-exclusive, whether the music is live, recorded or filmed. Every user in every market may simultaneously perform the same composition. Whereas a film may be licenses to only one station or one CATV operator in a market, music licenses permit performance of a musical composition on any number of different outlets-radio, television, night clubs, background music services and other users, to the detriment of none. To give an example of how this operates, only one person in a community may have the right to show the film "BORN FREE.” The musical composition “BORN FREE," which is incor, porated in the picture, may, however, be performed by every establishment that uses music, from skating rink to television station. This crucial and basic diference is alone enough to require the separate treatment of music licensing.
2. CATV operators expressed fears about the complexity of clearing each individual musical composition or performance. This problem does not exist in music licensing. Virtually all of the 27,000 users of BMI music (and this is equally true of its two competitors) have voluntarily elected blanket licenses under which they can perform all of the musical compositions in the BMI repertory at any time and by all means without the need of separate or individual permissions or clearances.
3. CATV operators expressed the fear that their right to disseminate programs would be limited by a restriction of such right for competitive reasons. No pog. sibility of such restriction exists in the music licensing field. BMI and its competitors are organized and exist only for the purpose of licensing performing rights on a non-discriminatory basis to as many customers as possible. This is BMI's sole function and its sole economic interest. It acts on behalf of approximately 25,000 composers and lyricists and 9,000 music publishers whose only interest is to collect reasonable fees from as many people as possible.
4. CATV operators have expressed concern with respect to the difficult problem of distributing royalties among individual copyright owners. No such problem exists in music licensing. BMI and its two competitors take full responsibility for distributing the fees they collect among the individual writers and publishers involved. The broadcasting industry, for instance, makes payment to three organizations and has no problems with respect to further distribution.
5. There is no risk that unreasonable fees will be exacted. BMI's position has been and is that, if negotiation does not result in voluntary agreement, it will leave the determination of the fee to binding, dispassionate arbitration. One of its two competitors, the American Society of Composers, Authors and Publishers (ASCAP) arrives at the same result through fixation of fees by the Federal Court. The other, Sesac, Inc., has similarly expressed willingness to arbitrate.
BMI speaks for no insubstantial interests. The music it licenses is a handmaiden to almost all television programs and it constitutes the major focus of interest of much television programming. When it comes, however, to the performance of music by radio (apparently with no restrictions of any kind on the extent of retransmission of programs from radio stations) it must be kept in mind that the overwhelming bulk of radio programming consists of the performance of music. Music licensed by BMI occupies a major role in all musical programming. The music licensing organizations should justly be considered to be in the forefront of “copyright owners."
BMI is, moreover, crucially important in the furtherance of the basic national interest in encouraging and maintaining the flow of music. Payment from performing rights constitutes the bulk of the income of most composers, lyricists and music publishers. Almost 90% of this income is derived from broadcasting. The basic theory of the copyright law, founded on the Constitution itself, is that the function of copyright is to promote the progress of art by the establishment and protection of the rights of authors. This right has always been implemented by the payment to authors of a proportion of the amounts received by commercial enterprises which use copyrighted works in public performance. The fee is traditionally arrived at by arms-length bargaining. In the case of music licensing there is ultimate recourse to arbitration or (in the case of ASCAP) court fixation of fees, where voluntary bargaining fails.
We cannot empasize too strongly how satisfactorily this system of licensing the performance for profit of nondramatic musical compositions has worked. Broadcasters who have licenses from the three established United States licensing organizations have for decades been unharassed by any claim by others. They use music without hindrance to satisfy the varying tastes of American audiences. They have available to them not only the music of the United States but, through reciprocal agreements between U.S. performing rights licensors and performing rights organizations in other countries, all the music of the world. It should be noted that in other countries of the world CATV is presently included in this system of licensing and is treated in precisely the same way as broadcasting. A system that works with such simplicity and effectiveness should not be destroyed without preponderating necessity.
As we have indicated, the expressed fears of CATV operators have no existence in music licensing and including such licensing in a system designed to deal with the wholly different problems involved in the licensing of other programmatic material is without justification. We must also add that music is no less entitled to special treatment than sports events.
The compromise proposal put forward by Mr. Whitehead and accepted, with some reservations, by the National Cable Television Association (NCTA), the National Association of Broadcasters (NAB) and a group of motion picture producers states:
“Unless a schedule of fees covering the compulsory licenses or some other payment mechanism can be agreed upon between the copyright owners and the CATV owners in time for inclusion in the new copyright statute, the legislation would simply provide for compulsory arbitration, failing private agreement on copyright fees.”
We accept this principle.
The first step in implementing such a proposal would obviously be negotiation. Unbelievable as it may seem, there has been no negotiation with the music licensors. BMI was not a party to the compromise agreement. It knows the terms of such agreement only from the trade papers. No one spoke for the music used so largely in television and so predominantly in radio. Since the basic quid pro quo of the compromise relates to exclusivity, no part of that consideration extends to the writers and publishers of music. The music licensors are left out in the cold.
BMI has long sought to negotiate with the NCTA. We reiterate in the strongest terms our willingness and desire to negotiate in the utmost good faith with CATV owners. We are confident that, if good faith prevails, a satisfactory voluntary agreement will result. Such an agreement, clearing the decks for the unrestricted use of our musical repertory under a single license on reasonable terms, for all purposes, in all manners, and by all means of dissemination utilized by CATV is what the public interest to be served by the CATV industry requires no less desperately than do the writers and publishers of music.
The acceptability of arbitration has been widely supported. Moreover, both the 1970 Rand Memorandum and the recent Sloan Commission Report recognizes the availability of the blanket music licensing system of the music performing rights organizations as a means of solving some of the problems involved in copyright licensing.
We stand ready to make our repertory available to CATV systems in the same way as it is made available to every other class of music users, including broadcasters. We are willing that the CATV systems should have full rights to our repertory under a single license and on a non-discriminatory, non-exclusive basis for every type of use. We stand ready to negotiate and, failing negotiation, to have the fees determined by dispassionate arbitration. We are ready to offer such licenses for a reasonable term and on payment of a reasonable percentage of the gross receipts of the CATV system. We will not require individual clearance of specific works or performances of works.
If the CATV operators do not implement negotiation or arbitration on such a basis, we will accept legislation which provides for compulsory arbitration of all retransmissions. Such statutory compulsory arbitration could be made operative only with respect to performing rights organizations certified by the Register of Copyrights as being primarily engaged in the licensing of copyrights music substantially performed hy United States broadcasters, the primary transmitters.
The necessity for special treatment of music renders inapposite extended comment on the other two questions raised in Mr. Brennan's letter.
Clearly, however, we do not favor the exemption of CATV systems having fewer than a stated number of subscribers. The persons who utilize music publicly for profit should pay a reasonable fee. The accumulation of payments from a substantial number of small operators results in necessary and deserved compensation for the creators of musical works. Fixing compensation by a percentage of gross recipients prevents such payments from being burdensome to smaller commercial operators.
With respect to the question of "whether royalty rates should be determined by a single graduated formula of a percentage of the gross reecipts paid by subscribers for the basic service of providing secondary transmissions or whether the formula should provide a basic rate for carriage of local signals, with an additional charge related to the number of distant signals carried by a particular system,” we emphasize that the method of music licensing that we put forward requires payments of a percentage of the gross receipts of the CATV system from all sources covered by our license.
Even since section 111 was formulated, CATV systems have become more sophisticated in their origination of programs, choice of programs, carriage of distant signals over the air by a variety of technical means, number of channels available, carriage of advertising, interconnection of systems, pay TV, ultimate availability of satellites and in other respects. No one can foretell from what source any individual CATV system will derive important income. We feel that the music licensing organizations can achieve a reasonable rate of payment only by arms-length negotiation or, failing this, by arbitration or court fixation which permits the basing of fees on all applicable income.
Not only is the position we advance essential for the support of the writers and publishers of music, but it is in the best long-range interest of CATV, which should have the same unlimited access to the music of the world as is enjoyed by every other type of music user. The music performing rights licensing system which is operative all over the world functions with extraordinary efficiency in the public interest. It obviates every problem which the CATV operators have raised as a possible limitation on the growth of their industry. It exposes the CATV operators to no unreasonable fees, but only to such fees as, in the absence of agreement, are impartially determined. To discard such a system in the absence of any existing need or grievance would, indeed, be to throw the baby out with the bath water.
New York, N.Y., July 25, 1973. THOMAS C. BRENNAN, Chief Counsel, oid Senate Office Building, Washington, D.C.
DEAR Tom: In addition to the joint statement of ASCAP, BMI and SESAC being presented on August 1st on the cable television matter, it was agreed that
our organization could submit an additional statement. I am therefore enclosing
STATEMENT OF SESAC Inc. Through ALBERT F. CIANCIMINO, COUNSEL, TO THE
UNITED STATES SENATE SUB-COMMITTEE ON PATENTS, TRADEMARKS AND COPY. RIGHTS
By letter dated December 15, 1971 Thomas C. Brennan, Chief Counsel to the Sub-Committee on Patents, Trademarks and Copyrights, invited SESAC to comment on the content of modified Section 111. More specifically, three issues were referred to us in Mr. Brennan's letter for comment. I would like to treat each of these items in the inverse order in which they were listed in Mr. Brennan's letter.
I. WHETHER ANY PARTICULAR TYPE OF PROGRAM MATERIAL SUCH AS MUSIC OR PRO
FESSIONAL AND COLLEGIATE SPORTS REQUIRE SEPARATE TREATMENT IN THE CABLE SECTION OF THE COPYRIGHT BILL
As the second oldest, but smallest of the three major performance licensing organizations in the United States, SESAC has, during its more than 40 years existence, successfully negotiated voluntary licensing agreements with virtually every radio and television station in the United States, with thousands of hotels, nightclubs, cabarets, as well as with other users of music such as professional football and baseball teams. We have, in each instance, made available to such music user a repertory of more than 120,000 copyrighted musical compositions for use on a non-exclusive, non-discriminatory basis in return for an annual license fee which has been accepted by virtually every music user as reasonable.
There has thus far been little need for resort to an individual tribunal to resolve disputes arising out of SESAC's rate schedules. However, SESAC has gone on record, both before the Whitehead Commission and this Senate Sub-Committee, as being willing to accept a system for compulsory arbitration in the event that cable television operators and SESAC cannot reach a private agreement.
Without belaboring a point which has often been made in the past, I believe it should be clear to all concerned that vis-a-vis the music copyright proprietor the cable television industry does not have any of the fundamental problems which have existed between the cable television industry and other types of copyright proprietors such as motion picture owners and broadcasters. We do not create difficulties with the cable television operator on such issues as exclusivity, availability and distribution of monies collected. I believe that the performing rights industry has also met any anxieties on the part of Congress concerning the possibility of unreasonable rates being demanded of the cable television industry by our willingness, in the case of SESAC and BMI, to submit to compulsory arbitration and, in the case of ASCAP, to resort to the Courts of the Southern District of New York in accordance with their consent decree.
It is for these reasons that SESAC strongly urges this Sub-Committee to provide for separate treatment in S. 644 for the licensing of cable operators to carry non-dramatic performances of copyrighted musical works on secondary transmissions. A compulsory license for the use of non-dramatic musical compositions is necessary only in the event that cable operators do not have available to them a determination by an impartial tribunal in the absence of a mutually agreed-upon rate.
II, EXEMPTION OF SMALL CABLE SYSTEMS The second issue on which our comment has been invited is whether or not there should be an exemption from copyright payments of independently-owned cable systems having fewer than 3,500 subscribers. SESAC can see no justification whatsoever for such an exemption. There seems to be no valid reason why a distinction should be made in the area of public performance of copyrighted music for profit between a small and a large cable system. The fact that smaller systems may not be making as much profit as larger systems will un