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NOTE: I first wrote this article in 1993 when I became intrigued with the complexity of the music licensing system, and to help educate those who are affected by ASCAP, BMI and SESAC. I have been tinkering with it ever since trying to keep it more up-to-date, since I want to help shed some light on a complicated situation that has a large impact on musicians, music listeners and public places where music happens. My experience is that musicians, venues and the general public know almost nothing of this system that has a great deal of influence in the music business, and involves nearly a billion dollars annually. These organizations exist by a strange set of legal circumstances, and are very little understood or regulated, yet they have a wide influence and control a lot of money in the modern music industry and in hundreds of thousands of places of business. A number of publications declined to publish this, not wishing to stir up too much trouble. There have been many edits and updates since it was written, and one of these days I hope to seriously research and update it or encourage a professional journalist to dig into it... I welcome your input to update this information if you find something incorrect. My only intent is to explain what I understand to be the way the system works, though my own opinion that we could design a better system no doubt creeps in.
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In order to prevent the chaos of each music copyright owner trying to supervise any performance or broadcast uses of their work, and the equally large problem of each user having to seek out the owners of each song for permission, the intermediary licensing organizations (namely ASCAP, SESAC and BMI) sell licenses to anyone who uses copyrighted material that belongs to their members. ASCAP claims that "the public interest demands that such an organization exist" and that it is "the only practical way to give effect to the right of public performance which the Copyright Law intends creators to have." Permission is essentially always granted in the form of a yearly blanket license, that entitles a buyer to use anything in the ASCAP or BMI catalog during a calendar year. The price for this blanket license is determined by an elaborate formula that involves the demographics of radio and TV stations, concert ticket price, seating of the room, the form of music (radio, solo, band, show, theater, etc.) and number of hours per week music is being used. (Although people have written me recently and said that the rates are based on fire-code "potential occupancy" and not something real like attendance or cash register sales.) Currently, television comprises 46% of ASCAP's revenues, radio 35%, and presumably performance venues provide the other 19%. ASCAP may not deny a license to anyone, nor discriminate in their prices, and all similar users must supposedly pay the same rate. The cost of the blanket licenses, however, varies widely, and many complaints have been filed about unreasonableness of the fees. A small nightclub might pay anywhere from $200-1000 per year to ASCAP alone. (There is a built-in but seldom used appeals process involving the U.S. Southern District Court of New York, whereby any purchaser of a license may contest the reasonableness of their fees to the court. The burden of proof of reasonableness is reportedly on ASCAP.) Muzak®, jukeboxes and some other groups like Ringling Brothers Circus and Disney on Ice have arranged their own special licenses at lower rates. Any organization that fails to buy a license is at risk of being sued by a licensing organization on behalf of the copyright owner, who need not be present in the courtroom, incidentally, even though they are a party in the lawsuit. Even parades and political fund-raisers with a marching band have been sued, and the courts handed down a landmark judgement against The Gap clothing stores chain (Sailor Music vs. Gap Stores, Inc., 1982) that has launched an aggressive new ASCAP campaign against all manner of retail stores that play the radio or tapes for shoppers. (This ruling was recently overturned in appellate court, however) Even aerobics and yoga instructors who use music have been notified by ASCAP of their need for licenses for the dance music they use in exercise programs! The legalese states that: "a singer is performing when he or she sings a song; a broadcasting network is performing when it transmits his or her performances; (whether simultaneously or from records); a local broadcaster is performing when it transmits the network broadcast... and any individual is performing whenever he or she plays a phonorecord... or communicates the performance by turning on a receiving set."
ASCAP, BMI and SESAC have field agents on payroll, employed by their 23 field offices, who watch the newspapers and radio (and even hire clipping services) and when a new nightclub starts offering live music, for example, an agent will either show up or write a letter demanding money for the license. The PRO's have recently adopted a clever new way to find out where the live music venues are. Musicians are invited to submit lists of where they have performed, and are promised some money in payment for their having played original music. This is very tempting, especially for unknown musicians, who tend to get little or no money in royalty payments from ASCAP or BMI. This way the PRO's can find out where music is being performed, and they also have written testimonial evidence from a writer member of their organization that copyrighted music was performed there. This saves ASCAP and BMI from having to find the venues and then send spies in to observe copyrighted music being performed in venues that do not have licenses, and it looks just like an attempt to be fair to unknown songwriters and no doubt costs very little in payouts. There are reports that SESAC offers monetary rewards to members who "turn in" music venues that do not have licenses.
A number of issues that that need clarifying have arisen since this was written, and could use the services of a skilled journalist or investigator to look into. These include whatever changes have been made by insiders to ASCAP and BMI charters and bylaws, the emergence of SESAC as a larger player in this game, the complex issues of licensing Karaoke, games, podcasts, satellite, cable and internet music, as well as other changes involving the use of internet, television and video in public businesses. To the best of my knowledge, the basic system of licensing is still in place, and the explanation of its details is still accurate, and I would venture a guess that size of the "licensing empires" and the total dollar amounts of licensing money have gone much higher than the old numbers I give here.