Posted by: Cory | July 9, 2009

ASCAP Inspectors visit DCE: An Analysis of Performing Rights Societies and a Plea to the Sensibilities of Congress


THIS IS NOT LEGAL ADVICE

Recently, WFPL’s Gabe Bullard wrote an article describing ASCAP inspectors visiting Derby City Espresso with a bone to pick over some royalties they believed they were due. In the article, Gabe admitted to taking a peek at the “form” (although it was more like a bill) which indicated an expectation of a payment of just under $500 which is roughly the cost of a blanket license for that size of a business (with a maximum of $912.50 at BMI, unsure of the others)

One issue with ASCAP, BMI & SESAC rises when they’re not being paid their license is that they have to gather evidence that their songs are being played. Generally, what happens is they will come in, sit down and write down every song they hear played and compare it against the list of songs in their catalog. If they don’t hear any of their songs, then they turn towards live music. However, because these inspectors may not be around in time for the show, they rely on assumptions with respect to these live performances, namely that when a venue has a stream of artists coming through it’s doors playing live music, one or more of those artists are likely to do a cover of a song from their catalog. If it’s a Bob Dylan cover, SESAC deserves to be paid, if it’s a U2 cover, ASCAP should get paid, and if you do The Beatles, you pay BMI.

Gabe’s article only slightly misstates the issue. ASCAP came in wanting money because they believe Matt is playing music at DCE. In fairness, while there are live shows at DCE, I’ve yet to hear a cover song and if there is music playing over speakers at all, I don’t know whether it’s the type of work for which a license is required. Nevertheless, I am writing to explain the system and warn against the consequences of not knowing whether or not you need to pay a performing rights organization. While inspired by Derby City Espresso’s story…this is a bigger issue than just Matt’s place. It’s important that you understand that THIS ARTICLE IS NOT LEGAL ADVICE.

When I say that Gabe’s article slightly mistates the issue, what I mean is that paying ASCAP isn’t exactly a protection against infringement, but rather what it does is to give the proprietor of the business a blanket license to publicly perform songs registered with ASCAP. The business is generally going to need to also pay the fee for BMI and SESAC, which comprise the other performing rights societies. As a result, you cannot look to a live performance schedule and say that having a certain number of bands playing per years equates to a certain number of dollars for the license, unless each of those bands cover at least one song in ASCAP’s catalog, which, in the case of DCE is certainly not going to happen.

For those who aren’t familiar with some of the things I’m referring to, it’s important to know what a performing rights society is and does. Normally with property, he who possesses something owns it. With intellectual property, and copyrights in particular, ownership rights get divided up more easily. One of those rights provided by §106 is the exclusive right of the copyright holder to publicly perform the work. Artists affiliate with one of these three performing rights societies namely ASCAP, BMI & SESAC. For administrative ease, performing rights organizations step in and give users (in this case businesses) a way to pay for their public performances to only one of three entities (as opposed to each individual copyright holder) and then remit that money to the copyright holder (ASCAP and BMI are non-profits and only collect their costs, whereas SESAC is for-profit and takes a percentage).  By making the process of paying for the public performances incredibly simple, businesses are more likely to pay the money that they owe to the copyright holder. Additionally, artists would not themselves be able to administer or enforce the payment for their public performances and would resultingly lose out on all public performances.

To simplify things further, these entities give the option to pay for a blanket license to use any and all of their works. This means that whether you play 5 songs or 5,000,000 songs, you pay essentially the same blanket rate (varied by certain factors, of which I am unfamiliar). As a result, they’re necessary to protect the rights of the copyright holders. Nevertheless, issues remain and I am strongly of the opinion that the right of these societies to collect on behalf of the copyright holder should be limited to accommodate technologies that, while post-dating the copyright act, are hardly “new”. As it stands, Congress maintains the (in my opinion) absurd stance that broadcasting music over the radio is somehow less damaging than webcasting music or playing it via satellite radio, and the effect is that businesses such as Derby City Espresso among others are taking a substantial financial hit for it.

To explain the point, §110(5)(B) provides certain exceptions for small businesses to play the radio or television to their patrons (which would otherwise be a public performance). In Matt’s case, if DCE is less than 3,750 sqr feet, then he’s free and clear to play the radio, if it’s more than 3,750 then he can play the radio so long as he doesn’t use more than 6 loudspeakers with no more than 4 in any single room or adjoining outdoor space.

Unfortunately for Matt & DCE customers, broadcast radio is full of commercials and nobody wants to play that at a relaxing place like DCE. The really unfortunate thing is that neither satellite radio nor webstreaming is included in this exception, so XM and Pandora and similar technologies are both out.  Of course, it’s important to note that broadcast radio is treated as an exception, and simply because it receives favorable treatment does not mean that other media should receive favorable treatment, however in the interest of “fairness” if such a thing exists, I am of the opinion that if it’s good enough for terrestrial radio, it’s good for satellite radio and webstreaming audio.

To that end, playing CDs or your iTunes playlist IS different from broadcast radio, streaming audio or satellite radio because of who is choosing the music. Just as you cannot choose what songs the radio plays, sites like Pandora have tried to avoid infringement claims by eliminating the ability to go back or to choose a particular song (although they do permit pausing, and while choosing one artist selects similar artists, so does choosing a station on broadcast radio). However, until Congress realizes that some new media isn’t functionally that different from some old media, playing media in this way continues to constitute a public performance, and doing so without a license constitutes copyright infringement. I contend that just as playing records wasn’t allowed then (or now), mp3’s and cds shouldn’t be allowed, but streaming audio and satellite radio should fall within the exception carved out for small businesses (particularly considering that as of this past Tuesday Websites have to pay a LOT of money for the public performance that they give by streaming (a minimum of $25K + the greater of 25% of all revenue or $0.08 per song played, rising to $0.14 in 2015) and to a lesser degree, satellite radio with an annual fee of 6% of gross revenue, rising to 8% in 2012.  25% of Pandora’s $19M revenue in 2008 would be $760,000 for a total of $785,000 which would seem to be more than enough to accomodate the businesses streaming audio.

Ultimately, ASCAP has to, from time to time, threaten legal action, and if venues continue to refuse to pay up, then taking them to court. If for no other reason then as to make an example of those places they catch. BMI files a suit against Pianos in NY this week which can turn a $500 blanket fee into some big numbers very quickly. The orgs push the limits, but ultimately they’re backed by Congress and until Congress catches up with the times…they’re going to keep tracking down these venues and enforcing their rights.  While the recording industry has taken a massive hit in recent years, and treating these technologies different from a public performance standpoint helped to appease the copyright holders, my belief is that the new royalty rates are going to inject a LOT of money back into the system and the distinction no longer makes sense (if ever it did).

Ultimately, the way I see it, most businesses should get a warning (which my understanding is that they do) because most people aren’t going to know the finer details of copyright law and know that they have to pay just because they play their iTunes from their computer but wouldn’t have to if they played the radio. It’s part of the forgiveness of the learner’s curve. If Matt has received some sort of warning, I’m sure that it is either a) overzealousness on behalf of ASCAP or b) a simple misunderstanding that he will be able to easily clear up. I bring the matter to public attention only because I find it important that other businesses gain a better understanding of their rights.

In the meantime, consider the differences between streaming audio, listening to satellite radio and listening to broadcast radio and ask yourself whether it makes sense for these to receive different treatment.  Additionally, do you think that the recent agreement regarding royalty payments from streaming audio could increase the chances that the exception could be broadened to include these technologies?

Update: Call me a genius.  Just as I had been arguing that broadcast radio is in no way different than webstreaming or satellite radio, and while I had predicted that the recent agreement regarding royalties for webstreaming (the final unresolved straw) would result in changes to the royalties paid for public performances by the end performer, namely businesses…it seems I overestimated a few things.  Now Pandora is joining the recording industry’s argument backed by new Congressional legislation that for-profit terrestrial radio is receiving an unfair and unwarranted advantage by being able to play music without having to pay performers for the public  performance of such works (although they DO pay the songwriters).  While in truth, the bill would likely only affect roughly 1/3 of all radio stations because of protections built in for stations making less than $1.25 Million annually, I suspect that many more terrestrial radio stations will be seriously impacted by any kind of licensing that goes on whether it affects them directly or not, and further if any additional or reduced license is required that they might have to build into their already depleted budgets, particularly with advertising revenue as down as it has been.

The question however remains, now that streaming audio and satellite radio both have to pay for their own public performances (and keep in mind, this is different than the public performance at places like DCE…here we are talking about the performance by the webstreaming site or radio station, not the bar owner who turns the radio on), is there any difference between them and terrestrial radio that deserves for one to have to pay millions of dollars a year and the other virtually nothing?  Now that websites and radio would be paying for the public performance, is permitting ASCAP to collect for bars actually playing that radio station to give them a windfall by collecting twice for what amounts to the same performance? If radio stations are going to continue being treated differently, how will these other technologies be able to justify the significant fees (other than of course by their legally binding obligations). Pandora wants to get on even footing with these radio stations because they are aware that they do what it is they do better than most terrestrial stations can do, and will gain significant market share once the playing field is leveled.

In a related note, ASCAP is now seeking royalties for websites embedding YouTube videos, although they promise not to target fully noncommercial personal blogs, but then you have to ask what those terms really mean. Things could get sticky.

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Responses

  1. It’s real simple, one of the only way artists are making money these days is through their publishing and performing rights money. Since most everyone has taken to stealing albums and songs (and I’m guilty of this as well) they are receiving less if anything from their labels. I could go deeper into this and on and on… but keeping with it’s simple. Venues/Retailers need to pay up just like TV/Film does. They are using music in the least as atmosphere improvement. If they don’t want to pay these minimal fees for this… stop playing music in your place. It’s that simple.

  2. The labels will find themselves obsolete because they will not be able to attract the best talent anymore. Indie artists have the right to choose copyright boundaries that fit their style (see creativecommons.org) which include allowances for mixing, redistribution, and redistribution for profit.

    Research has shown that looser copyright laws benefit the artists financially. Many artists claim that free downloading increases ticket sales.

    It is true for me personally. Because Queen Latifah allowed free listening of her entire Dana Owens album, i was more than motivated to buy a ticket to a show – because i appreciated and knew the music.

    Goodbye plantation style – top down – ownership of music. There is PLENTY to choose from outside of the labels, and your heavy handed enforcement of outdated laws will cause the old music to be buried along with the old ways, pushing the rise of the indie artists who use the new tools effectively.

  3. First off, this doesn’t have anything to do with copyright laws or major vs. indie labels.

    Secondly, music ain’t free, nor should it be. You don’t hear bar owners complaining about having to purchase a liquor license. If you want music in your place of business, you have to follow the appropriate regulations, plain and simple. As a musician myself and an ASCAP member, I’m glad to see my PRO is making an effort to keep tabs on this type of thing. It’s hard enough to make a living as a musician without people trying to circumvent things that help us musicians do what we do.

    I can’t think of any specific examples in Louisville, but many smaller venues have a strict “all original, no covers” policy in order to avoid such issues. I’ve played venues where I was told specifically “don’t play any covers.” That’s one way to avoid blanket licenses, but even then, it’s very risky, since a song doesn’t technically have to be a cover to get you in trouble. For instance, like I said, I’m an ASCAP member, so if I were playing some of my own songs at Derby City Espresso, they could still get into trouble even though the songs are my originals. They’re still protected by ASCAP.

    In short, DCE really just needs to either do the music thing the right way or not do it at all. It’s that simple.

  4. Really!

    Never would have I thought that playing music in a bar or coffee shop that’s coming out of your own iPod/computer would be so offensive.

    Let music be music. Let customers come in, get a beer, and sit down with music playing behind them while they catch up on their NY times or a good book they found without having to think “I hope this asshole made sure to pay these people”.

    I’m shaking in disgust. I’m also disgusted to see people agree with this nonsense. People who claim to be artists at that.

    Jeffrey Smith, it’s real simple. No ones playing Waterproof Blonde in their shops for atmosphere improvement. Your insight is garbage. Shave your chin hair and go work a desk job at Humana. Stay away from music please.

  5. While you’re at it, give the customers the beer too. I just want to relax and have a drink. Why am I being hassled with paying for it? Let beer be beer.

    Your argument makes no sense. The most obvious point being that you insult someone else for their opinion on music as atmosphere improvement, while at the same time making the same exact same point yourself about people having a beer, reading, and having music playing behind them. Care to explain how that’s not atmosphere?

    You’re surprised an artist would have such an opinion? You seem to suggest that you’re all about the music, but your attitude is actually a big “f#ck you” to people like myself who are trying to make a living as artists. You care about the music, but you couldn’t care less about the people making the music. Go ahead and be disgusted all you want, but maybe you should be disgusted with yourself as well.

  6. I’m not walking into a bar every Tuesday then walking out with a CD in my hand. There is a HUGE difference between paying for a beer and music being played over speakers in a coffee house or bar. Isn’t there? The only way it could make a little bit of sense is if ASCAP found out that DCE downloaded the music illegally then started playing it throughout the store. But even then it’s a maybe. DCE isn’t passing out burned copies of the CD. They were playing it throughout the shop. Plus, it’s a personal business. The owner of DCE is THE only guy that works there. If anything could be said, why hassle the guy for wanting to play some music at a good volume level to help the day pass? Who’s walking into a good coffee house because the house music is awesome? You go for the good coffee or beer. Or atleast it should be your main reason. The results of what makes or breaks a shop is never rooted in “how good was the house music”.

    I never denied atmosphere, but I do deny the fact that someone claims that it’s what brings people in or it is so important to the fact that it should be at a price. That it is in some way credited to why a business would have customers. That you are making profit off of someone else. When did you ever hear from someone else “Awww Snap! Highland Coffee Co. plays Fleet Foxes off their iPod!” Maybe if you’re running a grocery store and you find that soccer moms shop with more ease because they heard Tina Turner in the form of a Casio keyboard.

    And you’re right, it is a big “f#ck you”!

    It’s a huge one in fact.

    And it has SO much to do with indie vs. major.

    These greedy major labels (and some so called indie) are getting everything they deserve in regards to the way downloading has gone. It’s a rare thing in this life for 9 out of 10 people to actually buy a legit record. I’m not a believer in Karma but dammit it brings me close to it.

    If you ask any local performing musician if they would like to make a living from doing music, they would answer with a big HELL YEAH. But if you are to bring up this topic to them I could bet half of them would care less. Any smart musician knows that to make a living in music it takes more than supporting what someone like ASCAP does. It’s a damned scratch off card. So many talented artist work hard every day and then find themselves calling it quits at 35 years old telling their wife and kids “Daddy played in front of 500 people once”. When did having your music played in public places become so offensive? Ooooohhhhhhhhhhhh. Because you didn’t get paid! Gotcha. “F#ck you, I don’t want it anymore”

    Hey B, tell me what band you play in and I’ll check to see if I own any of your records.

  7. Again, performing rights organizations and record labels are two totally different things. It’s important to make that distinction, because much of your argument has little to do with the actual subject. A PRO simply monitors where and when an artist’s music gets performed publicly, and pays royalties accordingly. One of the main points of discussion is what exactly constitutes a “public” performance, but it truly is NOT a major/indie discussion. PROs and record labels are totally independent of each other. PROs encompass everybody, from the Bob Dylans of the world all the way down your favorite local songwriter and everything in between. If you think you’re just sticking it to some greedy fat cats, then you’re wrong.

    I’m not saying someone should pay up every time they turn on a radio or listen to an iPod. In fact, I admittedly don’t really have much of a beef with the canned music thing, nor do I find it “offensive” as you say. My original comment was related to live music, and that’s really the issue here with DCE, so I’m not sure how this became an argument about background music. In some cases, you need a license for canned music, but DCE is much too small for this to be an issue. ASCAP’s issue with DCE is about live music peformances.

    I never once said that the whole house of cards of making a living in music depends on PROs. In fact, that type of royalty income is very low on most musicians’ list of priorities, but you do have to get paid to make a living. Being a musician isn’t like most jobs, where you get handed one neat little paycheck every week. Most musicians have multiple avenues of income, royalties being one of those avenues. Think of it like tips. Servers get paid, but they also depend heavily on tips. I’ll admit, it’s not exactly the same, but not paying for your music is similar to stiffing your server on a tip.

    What’s really irritating to me is not even this issue, but the increasingly prevalent overall attitude that musicians shouldn’t care about money. Yes, most musicians, myself included, are most concerned with expressing themselves creatively and having their music heard. But when you start down that slippery slope of shutting off sources of revenue for musicians, then guess what? It’s the music that suffers. Believe you me, if all I cared about was making money, I definitely would not have pursued a music career. But, do I care about getting paid for my music? You bet your ass. I can’t pay my rent with good vibes and moonbeams.

    Any “smart” musician who would care less about this topic isn’t really a smart musician at all. Yes, it’s a creative art, but when it comes right down to it, to make a living doing it (or doing anything, for that matter) requires business sense and knowledge of the industry. If you don’t care about that stuff, that’s precisely why you won’t make a living as a musician.

  8. I’m always amazed at the audacity of some folks to post scathing messages on blogs under aliases, yet call out people by their real names and insult them publicly. The anonymous environs of the internet lowers inhibitions I guess.

    And for the record, Jeffrey Smith genuinely loves artists and is an asset in this community. He most certainly could get a day job at Humana and make a hell of a lot more money than he makes now, but he’s a true advocate for artists and I personally know many musicians that would feel the loss if he were to take that Humana job.

    But onto the topic at hand…

    I think an even bigger issue to think about is how our culture has dumbed down music and reduced it to mere entertainment rather than an artistic medium. Why else would so many people feel they can consume music without paying for it? We wouldn’t go into an art gallery and swipe a Picasso and walk out with it. Likewise, you don’t see people bum rushing the theater expecting to see a play for free (KY Shakespeare Festival notwithstanding).

    So why do we do this with music? When in our history did it suddenly change? It changed with the introduction of recorded media. Now what was once pubic domain, the people’s music – shared and sung in churches, factories and communal public spaces – has now taken on a dual role: that of both a work of art and, equally, a marketable, profitable product. And with all commodities, someone owns the copyright and reserves the right to place a dollar value on it. We’re not singing “Swing Low Sweet Chariot” in the work fields anymore. So pay for it.

    Downloading has all but taken away profit potential from record sales (whether major or indie label), leaving basically live performance (ticket sales) and licensing/publishing (of copyrighted material) to earn money for musical creativity. In many markets ticket sales are down; some folks seemingly content to substitute attending a show for a shitty YouTube version (read again: dumbing down of music). At this rate, what will be left as outlets for artists to make a decent living? These days, many folks are turning to licensing music to TV/film and, as Cory posted about, publishing/copyright protection for a decent chunk of that living.

    I heard many of Elvis Presley’s songs’ copyrights expire soon, making them up for grabs. Maybe in 100 years Fleet Foxes’ copyrights will expire too, and then we can play their songs anywhere we want without penalty. Until then, I hear Skull Alley hosts a sacred harp shape-note singing night monthly. Dust off your great-grandmother’s hymn book and join them…you won’t have to pay for it.

  9. Thx for this.
    Might come handy.
    btw: love your blog, its so smooth

  10. As record label’s fall more pressure goes to PRO an pub lishing companies to make more money.Now talking about clubs an their license fee’s if it s fair or not… Just imagine this.Its 1230 at night every body is in the club having that beer and a great time. Suddenly all music stops. What is going to happens next.?!! After a big booo for the DJ people will start to leave. You know why?! because music keep them in there entertained and buying beer.So we can say ” music” is a great business partner for the club owner that needs to get paid. This is so true that most clubs and their clientele are defined by the music they played. So if you don’t want any PRO in your establishment ., keep it really quiet.but I will have big doubts about how good your beer sales will be.


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