From: Subject: ASCAP & BMI - Protectors of Artists or Shadowy Thieves? Date: Tue, 9 Apr 2002 20:40:10 -0600 MIME-Version: 1.0 Content-Type: text/html; charset="Windows-1252" Content-Transfer-Encoding: quoted-printable Content-Location: http://www.ram.org/ramblings/philosophy/fmp/royalty-politics.html X-MimeOLE: Produced By Microsoft MimeOLE V5.50.4133.2400 ASCAP & BMI - Protectors of Artists or Shadowy = Thieves?

ASCAP & BMI -- Protectors of Artists or Shadowy Thieves?

By Harvey Reid


NOTE: I wrote this article when I became = intrigued=20 with the complexity of the music licensing system, and to help fill in = the=20 knowledge gaps among those who are affected by ASCAP and BMI. I wanted = to help=20 shed some light on a complicated situation that has a large impact on = musicians=20 and places they play. These organizations exist by a strange set of=20 circumstances, and are very little understood or regulated, yet they = have a wide=20 influence and control a lot of money in the modern music industry. Many=20 publications have declined to publish this, not wishing to stir up too = much=20 trouble. There have been a few changes since it was written, and one of = these=20 days I will update it...

Many of you who are music listeners = have no=20 doubt read the small print in the liner notes of recordings, seen the = letters=20 ASCAP and BMI, assumed that they had some legal meaning concerning = ownership of=20 music and never thought much more about it. Many musicians, writers, = club=20 owners, promoters and other active participants in our music industry do = not=20 know much more about these organizations than this, even though they = control=20 huge amounts of money and have vast power in the music business. ASCAP = stands=20 for American Society of Composers, Authors and Publishers & BMI for=20 Broadcast Music Incorporated, and they are known as "performance rights=20 licensing agencies". For all the average musician probably understands = of the=20 real mechanisms of these organizations: the specifics that determine the = collection and distribution of money, who gets paid when, how much they = get, and=20 how the vast underground network of legal and financial regulations and=20 procedures work, ASCAP or BMI might as well be the CIA. And it may well = be true=20 that those who understand this system the least are the ones who have = the most=20 legitimate grievances against it. It is certainly worth trying to look = inside a=20 hidden industry that controls almost half a billion dollars in the name = of the=20 public good, without any elected public officials or legislatures having = a say=20 in its operation. ASCAP derives all its power not from any laws that = have been=20 passed by elected officials, but from a decades-old federal judicial = consent=20 decree in the 2nd District Court of New York.

Struggling = musicians and=20 songwriters seem to have become pervaded with sort of a lottery-ticket=20 mentality; they know that if they make it big they will receive a lot of = royalty=20 money someday from ASCAP or BMI, and since nobody plans to stay unknown = and=20 impoverished, the concern among less-than-world-renowned music business = people=20 about what they might do to get a fairer shake in the system before fame = sets in=20 seems small. ASCAP has published remarks to the effect that all legal = challenges=20 to their system have come from consumers of music and not owners, and = they state=20 in their literature that "apparently the writers and composers are = satisfied=20 with the current system". ASCAP and BMI are extremely powerful = organizations=20 that control large amounts of money, and through the mechanisms of their = various=20 policies, lawsuits, intimidation, odd legal arrangements and seemingly = outdated=20 legal precedents, they are systematically engaging in activities that = are=20 entirely unregulated by elected officials, with rules and policies set = by those=20 who profit the most from the current system. Those who are in a position = to=20 reform the performance rights licensing system are the very ones who are = profiting most from it, and the system currently shows no signs of = abandoning=20 any of its methods of running itself.=20

History of ASCAP and BMI

ASCAP was formed in 1913, shortly after = the=20 1909 Copyright Law was enacted, supposedly prompted by the discovery = that=20 beloved songwriter Stephen Foster died penniless while publishers became = wealthy=20 on his music. A system was set up, based on tabulating the publishing of = printed=20 sheet music and soon amended to include the sales of recordings, whereby = the=20 composer and/or writer would receive a royalty for each copy = distributed. A=20 royalty rate of about 1=A2 was originally paid per copy; over the years = the=20 mechanical rate, as it is called, has risen to about 5.7=A2 per song in = the last=20 80 years. Set up as an unincorporated membership association under the = laws of=20 New York, ASCAP's licensing contracts with its composer and publisher = members,=20 who actually own the copyrights, gives it the power to collect and = distribute=20 money and to police infringements. In 1991 ASCAP had about 32,000 writer = and=20 14,000 publisher members.

As sound recording, movies, television = have=20 been introduced, ASCAP has expanded its system to collect money from = each new=20 format. ASCAP claims that their methods of distribution are fair and = regulated,=20 and until the advent of modern mass media entertainment, they may have = done an=20 arguably adequate job of tabulating and paying out money. With musical=20 performances now including live music, elevator and office music, radio, = TV,=20 movies, video, airplanes, theater, tape decks, and jukeboxes in addition = to=20 printed sheet music, the task of logging the usages of copyright has = grown=20 astronomically. ASCAP estimates that 1 billion musical performances = occur in the=20 U.S. yearly.

BMI was created in 1940 as a response by many = (primarily=20 broadcasters themselves who were buying ASCAP licenses) who felt that = ASCAP=20 engaged in monopolistic practices, price-fixing, and ignored the needs = of=20 alternative musics such as R&B, country and rock. It is now about = 60% the=20 size of ASCAP in revenues.

A privately-owned third, and much = smaller=20 organization, SESAC (less than 2% the size of ASCAP) was formed in the = early=20 1960's, and has been primarily involved in gospel music.
Any inquiry = made=20 directly to either ASCAP or BMI seems to yield many shiny, = expensively-printed=20 pamphlets with lots of glamorous photos of stars, detailing how fair and = just=20 they are about paying royalties to deserving writers and publishers.=20

How the system works...

In order to prevent the chaos of each = music=20 copyright owner trying to supervise any performance or broadcast uses of = their=20 work, and the equally large problem of each user having to seek out the = owners=20 of each song for permission, the intermediary licensing organizations = (namely=20 ASCAP and BMI) sell licenses to anyone who uses copyrighted material = that=20 belongs to their members. ASCAP claims that "the public interest demands = that=20 such an organization exist" and that it is "the only practical way to = give=20 effect to the right of public performance which the Copyright Law = intends=20 creators to have." Permission is granted in the form of a yearly blanket = license, that entitles a buyer to use anything in the ASCAP or BMI = catalog=20 during a calendar year. The price for this blanket license is determined = by an=20 elaborate formula that involves the demographics of radio and TV = stations,=20 concert ticket price, seating of the room, the form of music (radio, = solo, band,=20 show, theater, etc.) and number of hours per week music is being used.=20 (Currently, television comprises 46% of ASCAP's revenues, radio 35%, and = presumably performance venues provide the other 19%.) ASCAP may not deny = a=20 license to anyone, nor discriminate in their prices, and all similar = users must=20 pay the same rate. The cost of the blanket licenses, however, varies = widely, and=20 many complaints have been filed about unreasonableness of the fees, = especially=20 against ASCAP. A small nightclub might pay anywhere from $200-700 per = year to=20 ASCAP alone. (There is a built-in but seldom used appeals process = involving the=20 U.S. Southern District Court of New York, whereby any purchaser of a = license may=20 contest the reasonableness of their fees to the court. The burden of = proof of=20 reasonableness is on ASCAP.) Muzak=AE, jukeboxes and some other groups = like=20 Ringling Brothers Circus and Disney on Ice have arranged their own = special=20 licenses at lower rates. Any organization that fails to buy a license is = at risk=20 of being sued by ASCAP on behalf of the copyright owner, who need not be = present=20 in the courtroom, incidentally, even though they are a party in the = lawsuit.=20 Even parades and political fund-raisers with a marching band have been = sued, and=20 the courts handed down a landmark judgement against The Gap clothing = stores=20 chain (Sailor Music vs. Gap Stores, Inc., 1982) that has launched an = aggressive=20 new ASCAP campaign against all manner of retail stores that play the = radio or=20 tapes for shoppers. (This ruling was recently overturned in appellate = court,=20 however) Even aerobics instructors who use music have been notified by = ASCAP of=20 their need for licenses for the dance music they use in exercise = programs! The=20 legalese states that: "a singer is performing when he or she sings a = song; a=20 broadcasting network is performing when it transmits his or her = performances;=20 (whether simultaneously or from records); a local broadcaster is = performing when=20 it transmits the network broadcast... and any individual is performing = whenever=20 he or she plays a phonorecord... or communicates the performance by = turning on a=20 receiving set."

ASCAP has field agents on payroll, employed by = their 23=20 field offices, who watch the newspapers and radio (and even hire = clipping=20 services) and when a new nightclub starts offering live music, for = example, an=20 agent will either show up or write a letter demanding money for the = license.=20 Refusals and arguments eventually lead to lawsuits, and the club always = loses,=20 often to the tune of tens of thousands of dollars in fines plus legal = fees per=20 infraction allowed by law. If a nightclub or even a store refuses to buy = the=20 license, then ASCAP or BMI will hire spies, often local music teachers = or=20 semi-professional musicians, who will make notes and testify in court as = expert=20 witnesses that on a certain day at a certain time a certain song was = indeed=20 played. Attempts by club owners to post "No ASCAP material to be = performed here"=20 signs or to ask that no musicians perform ASCAP material have not worked = (Dreamland Ballroom vs. Shapiro, 1929; also Shapiro, Bernstein & Co. = vs.=20 Veltin, 1942), and invariably some musician unwittingly performs = something in=20 ASCAP's immense catalog. Note that even though the musicians or the = employees=20 decide what is played, it is the owner of the establishment where the = music is=20 played who gets sued. ASCAP bases this on the claim that "it would be a=20 practical impossibility for ASCAP to locate and license musicians, who = are often=20 itinerant." Being a type of tort law, is not unlike the "deep-pockets" = style of=20 lawsuit that enables aggrieved parties to select which of the "jointly = and=20 severally liable" parties to sue, presumably whomever they might be = likely to=20 get money from, rather than just the party that caused the problem = directly.=20 According to current legal precedent, there is no way to beat this = system, as=20 numerous nightclub owners who felt that the fees were unjust have found = out.=20 Antitrust laws have given ASCAP a little trouble over the years; = however,=20 current legal arrangements have created a seemingly monopolistic system = that=20 even powerful groups of television and radio stations have failed to = break in=20 court. (You are not free to shop at another licensing agency if you = don't like=20 the deal or the price ASCAP offers. If you use the music, either you pay = their=20 fee or they sue you if they catch you using it without the license. And = they can=20 charge you penalties up to $20,000 + legal fees per infraction!) ASCAP = has teams=20 of lawyers who do nothing else and who are extremely well-versed in the=20 technicalities of the law, and a tavern owner and a small-town lawyer = have=20 essentially no chance of winning a lawsuit. Legal right to do this has = been=20 established over a series of court rulings and legal precedents, and so = far no=20 one has been able to win a lawsuit against ASCAP for infringement of = copyright=20 by "public performance." Apparently ASCAP has the judicial system in = their back=20 pocket, and even organizations as large as CBS have lost lawsuits = against them.=20 To quote an ASCAP pamphlet: "ASCAP infringement cases are = 'open-and-shut'­p;=20 for all practical purposes there is no defense to them."

Indeed, = over the=20 years the courts have struck down a myriad of challenges from schools, = state=20 universities, non-profit organization, private clubs and the like who = have=20 sought to find a loophole by claiming to be non-public or = non-performing. People=20 have unsuccessfully argued that purchasing of sheet music or records = entitles=20 them to be used in performances. A much-contested area has involved = retail=20 stores playing the radio or tapes. The law says that such use is legal = if the=20 components used are "of a type commonly used in private homes", though = GAP=20 Clothing Stores lost and then won their lawsuit, apparently because of = their=20 systematic and large-scale commercial intent to entertain their = customers, even=20 though they were using supposedly legal small home stereo components in = all=20 their stores. Apparently the courts have decided that stores with less = than 620=20 square feet of space are exempt. Principals and officers of corporations = have=20 been found personally liable for copyright infringement. Hotels, motels, = universities, summer camps, members-only clubs and even semi-private=20 organizations need licenses, as do non-profit and public radio stations. = Peppercorn, a store in Boulder, Colorado that sells gourmet cookware = recently=20 lost a case in which they were playing music that was being sold in the = store=20 (supposedly an exemption), but because they were selling other things = than=20 music, they were ruled non-exempt and fined.

There are many = stories of=20 store and restaurant owners who had no idea what they were dealing with = and=20 actually thought they were being shaken down by the Mafia when ASCAP = agents=20 confronted them. Indeed, ASCAP has been sued on mob-like charges = numerous times,=20 and in the important ASCAP vs. Buffalo Broadcasting case in 1980-82, = ASCAP lost=20 in federal court on charges of price-fixing, racketeering and = monopolistic=20 activities. The decision was reversed in appeals court based on the = court's odd=20 determination that since a radio station could buy a per-song license = (at a=20 phenomenally higher rate per song) from ASCAP, there was somehow free = trade and=20 no price-fixing inherent in the blanket license. In the fine print of = ASCAP's=20 contract with broadcasters it says that a user may buy a per-song = license,=20 though apparently no licensee has ever bought one. It is extremely = interesting=20 to note that live music venues are not offered a per-song license from = ASCAP as=20 an option. They have only one choice: the blanket license.

Note = that=20 even though a record company that manufactures a recording pays the = owner of the=20 copyright mechanical royalties, the radio station that plays it must pay = again=20 for their ASCAP license; and a restaurant or store that plays that radio = station=20 to entertain their customers must pay a third time. This was determined = in a=20 landmark 1931 Supreme Court case against a New York hotel. Oddly, a = different=20 arrangement is now the case in television, and restaurants pay for=20 re-transmission of radio broadcasts but they do not have to pay the = creators of=20 television shows for cable re-transmissions of television in the bar!=20 (Fortnightly Music vs.United Artists, U.S. Supreme Court, 1968 and = Columbia=20 Broadcasting vs. Teleprompter Corp, 1974)

There are some types = of=20 organizations that are exempt from needing ASCAP licenses. These = exemptions are=20 the following:=20
  1. religious organizations (during worship only)=20
  2. non-profit educational institutions=20
  3. record stores and other establishments where the primary purpose = of=20 playing the music is to sell it=20
  4. government bodies (state and federal)=20
  5. state fairs and agricultural events=20
  6. certain veterans and fraternal organizations during charitable = social=20 functions (added in 1982 in a last-minute legislative session)=20
  7. various "non-commercial" and charitable performances that have no=20 admission charge, commercial intent or paid performers=20
  8. movie houses
ASCAP then does what they refer to as = "random"=20 sampling of radio airplay, and through a bewildering series of = calculations that=20 weight the performances according to the estimated audience size of the = station,=20 they distribute money collected from licenses to owners of copyrights of = material that has been logged in their surveys. ASCAP secretly tapes = 60,000=20 hours of radio broadcast a year and 30,000 hours of television for their = samplings. Based on their estimate of 600 million broadcast performances = a year,=20 at an estimate of 12 songs per hour, this divides out to about one tenth = of a=20 percent of all airplay gets sampled to determine who gets nearly $300 = million!!=20 ASCAP samples in 3 hour television and 6 hour radio segments, called = units, and=20 their strategies for taping are not public information. Neither ASCAP or = BMI=20 does any survey of performance venues (clubs, concerts, festivals, = etc.);=20 therefore all money collected from licenses of performance venues is = paid out=20 based on radio airplay. The assumption is that this is fair and = reasonable.=20 Unlike ASCAP's taping of broadcasts, BMI does their sampling directly = from radio=20 station logbooks.=20

Problems with the system

Complaints against the unfairness of = the music=20 licensing system seem to involve ASCAP far more than BMI, and many = performance=20 venues have no complaints with the usually much lower fees BMI charges. = For this=20 reason, most of the following complaints and problems deal specifically = with=20 ASCAP.=20

With the explosive international growth of the multi-media = entertainment=20 industry and its domination by American-owned copyrights, the money = involved in=20 performance-rights licensing continues to grow, and so do the questions = about=20 the inherent fairness of the system. ASCAP's total money collected = jumped from=20 $200 million to $350 million from 1983 to 1990. Exactly what the average = person=20 or music business participant can do to learn more about the system or = to reform=20 it is unclear. ASCAP will probably not start policing itself, and just = start=20 paying money to starving artists. Change will be slow, and only if = groups of=20 individuals organize and contact their congressional representatives or = appeal=20 to ASCAP or the District Court of New York does there appear to be much = hope of=20 change in the near future. ASCAP is currently lobbying very hard to = impose a tax=20 on DAT (Digital Audio Tape), and it is likely that they will find more = and=20 better ways to reach into our pockets when we seek entertainment. The = old days=20 when everybody made their own music are gone forever, and gone also are = the old=20 ways of paying the piper or the fiddler for the music. =