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Musicians vs. Venues: lawsuits, licensing fees and the middle men

Performing rights organizations on one side, venues on the other, musicians someplace in between

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Late last year, pop-culture vulture TMZ.com reported that Taylor Swift, performing rights organization BMI and a host of other plaintiffs were suing a North Idaho bar for playing Swift's music without paying licensing rights. The number of plaintiffs listed in the suit rivaled a happy hour crowd—and included the names Warner and Sony, powerful media organizations with enough money to squash anyone who ignores the rules like a ripe cherry tomato.

Across the Web, Swift supporters applauded the move and detractors wanted to know why the hell BMI was going after some small pub in Nowhereseville, Idaho, on Swift's behalf. She was named Billboard magazine's artist of the year for 2009, her 2006 debut album was in the Billboard 200 for 157 weeks—making it the longest-charting album of the decade—and the story of her impromptu tete a tete with Kanye West at last year's Video Music Awards spread like a virus. Even President Barack Obama chimed in on West's behavior toward the startled teen. At the very least, all of that attention translates into album and ticket sales and, at the very most, that translates into money cha-chinging into her bank account.

But that's not the point. Like the answer so many plaintiffs give Judge Judy when she asks why they're suing their cousins for unpaid cell phone bills: "It's the principle."

It's that idea of principle behind the service performing rights organizations, or PROs, offer. PROs collect royalties on songs—whenever they are played or performed—and distribute them to performers, authors and composers, from Taylor Swift to some songwriter named Taylor living in the middle of Iowa. Arguing against PROs sounds like an argument against the rights of musicians. Arguing for them, however, sounds like a strike against the venues, often small, that pay PROs for the rights to play music. It's a complicated issue with venues on one side, PROs on the other and musicians kind of in the middle.

Each country typically has one PRO. The United States has three: ASCAP, BMI and SESAC. PROs collect money from any public venue that plays music registered with them and pays royalties to the songwriter, publisher or performer of that music.

SESAC is arguably the smallest and least known of the three, but in recent years, has worked at becoming a larger player in the licensing game. SESAC, which stands for Society of European Stage Authors and Composers, was initially established in 1930 to help "European publishers with their American performance royalties." Headquartered in Nashville, Tenn., SESAC has grown tremendously in its 80-year history and now has offices in New York, California, Florida and Georgia. But, according to Bill Lee, SESAC's head of licensing, the PRO has consciously chosen to stay smaller so that it can offer more personal attention to its thousands of affiliates—the preferred term for performers, authors and publishers, who include Bob Dylan, Neil Diamond, Rush, MGMT and the Avett Brothers.

While its smaller size and personal attention may set it apart from ASCAP and BMI, Lee explained that one thing sets the PROs apart from each other: A songwriter or performer can only join one organization.

"It's a free-market kind of situation, so the copyright owner or songwriter decides, 'I think this company will represent my interests best.' When they do so, the songs that they represent become the repertory of that PRO," Lee said. "And those decisions drive the repertory for that organization."

They also drive the decisions a venue or bar makes on which PRO to license music from, which is really no decision at all. If a bar or restaurant owner, for instance, wants to offer live musical entertainment—or, for a slightly lesser charge, recorded music—to its patrons, it has to pay for that or face possible litigation. Period. The owner can choose only to license music from ASCAP, inarguably the largest of the three PROs, but would have to make sure that only music from ASCAP's catalog is ever played or performed.

"That's the key difference," Lee said. "What happens is that since the PROs represent different songwriters, they represent different catalogs. So most music users deal with all three PROs because by doing so, they then have authorization to utilize all the copyrighted music basically throughout the world. Because while ASCAP, BMI and SESAC only license in the United States, each of us have agreements with all the foreign societies so we actually license their performances in the United States. So a license with all three, [allows a venue] to use virtually all copyrighted music."

All three PROs offer any venue that wants to play music a license.

"It's like a library card," Lee said. "You can use as much or as little of the repertory as you want, and you don't have to keep records of it. By having a blanket license, a band can come in [to a venue] and play any song that they want and it's covered."

Without these blanket licenses, the venue—whether it's a bar, a restaurant or an ice skating rink—is open to lawsuits brought about by PROs on behalf of their affiliates in the name of copyright law infringement.

Under copyright law, anybody who performs music needs permission prior to playing or performing that music, unless it is considered public domain. But chances are very good that any music currently bumping through a popular nighttime venue is not in the public domain. Under the copyright law, listed in Title 17 of the United States Code, works created after Jan. 1, 1978, are protected for the life of the longest surviving author plus 70 years, meaning the earliest they could go into the public domain is the year 2048. Works registered before Jan. 1, 1978, are protected for 95 years from the date the copyright was secured. And anything registered before Jan. 1, 1923, is now in the public domain. So if a venue owner wants to plan his or her playlist around songs like 1902's "Bill Bailey, Won't You Please Come Home" or 1913's "Danny Boy," there's no need for a blanket license. That might work well at a senior dance, but it isn't going to fly at a hip nightclub. So those venue owners buy the licenses.

Rocci Johnson, co-owner of Humpin' Hannah's—a Boise institution for three decades and frontwoman for Hannah's longtime house band, the Rocci Johnson Band—purchases blanket licenses from all three PROs for a cost of about $5,000 annually. Hannah's is only open four nights a week now, but back in the '80s, the place was jumping with live music every day but Sunday. And back in the '80s, their licensing fees cost them closer to $30,000 a year.

"We are charged based on the amount of time that we could be open and utilize music. Like, we open at 3 p.m. and during that time, we have background music," Johnson explained. "All of the time we are potentially open, we have to pay for the rights to music. Even if we have the radio playing, any kind of background music that is copyrighted, we have to pay for it." Even karaoke.

The algorithms that PROs use to determine how much to charge is, in part, what makes some venue owners so angry.

"They charge for occupancy and for number of seats. Then they qualify that by the number of bar stools and other types of seating," Johnson said. "Then they have categories of live music. Karaoke is a different charge and a DJ is a different charge."

Since the Rocci Johnson Band is almost exclusively a cover band, not licensing music from all three PROs would be legal suicide.

"We do everything above board," Johnson said. "We're so high profile, we don't want to be caught with our pants down. We've been in business for 31 years and it's better to do things the right way."

Hannah's did at one point try to talk to the PROs to see about lowering their fees but didn't get anywhere.

"It was like they really don't give a shit," Johnson said. "They just stonewalled and told us what they would do to us litigiously if we didn't pay. Do we really want to get caught up in litigation?"

And litigation may come from all three directions. When a bar owner brings in a band, he or she probably doesn't know exactly what music they will perform. They may be known for their originals, but slip in a cover of Cyndi Lauper's "Girls Just Want To Have Fun" (ASCAP), Bob Dylan's "Blowin' In The Wind" (SESAC) or Lady Gaga's "Poker Face" (BMI) at the end of the night. By paying for a license from all three PROs, the venue is protected, strange as it sounds, from those performers. Those licenses also cover jukeboxes, digital music services, Muzak, satellite radio, DJs, karaoke and even a business owner's personal CD collection if he or she chooses to play it during business hours.

Kevin Settles, who owns Bardenay, won't allow his employees to play any of their own music in his establishments. He also won't let any band who plays at his Eagle location to play cover songs.

"We've never had live music [at Bardenay] downtown. But in Eagle, Wednesday nights were a little slow and the co-manager out there loved music and asked if we could please have some live music," Settles said.

So they started booking bands to play on the patio. And Wednesday night traffic started to pick up. And that caught the attention of ASCAP.

"We got a bill for $8,000. That's when I said we're done," Settles said.

And then BMI started calling.

"They were calling continually and threatening to sue us. I finally had my attorney send them a notice saying that they had to prove we weren't complying with the law," Settles said. "I told them, 'You come down and sit on my patio and if you catch a musician playing a song they're not supposed to play, then we can sit down and talk."

So Settles had to decide whether to have live music at all; he couldn't justify paying $8,000 for a license—and that was just to one PRO. So Settles worked up a contract that local musicians are required to sign before they can play guaranteeing all of their music is original, and they don't take requests from customers. Settles makes it very clear to musicians who want to perform on Bardenay's patio: If you can't play all original music, you can't play here.

Bardenay does have background music playing inside both of his venues, and he pays for Muzak, which has already been licensed by the PROs.

"Music isn't really our thing," Settles said. "If we were a regular nightclub, I wouldn't have a problem with it. But we're not."

Jerry Bailey, the senior director of media relations for BMI, which stands for Broadcast Music Inc., said that he hears a similar argument from venues all of the time. Bailey said that what BMI does by charging licensing fees and/or contacting venues that play copyrighted music but refuse to pay for it, is make sure copyright owners get what's due to them.

Though a monolith with 6.5 million works in its repertoire from 400,000 copyright owners, BMI is a not-for-profit agency.

"For every dollar we get, 88 cents of that goes to the copyright owners," Bailey said. "We run on only 12 percent."

BMI uses a standard set of formulas and the fire-code regulated occupancy number of a place to determine what a venue's fee should be, treating "all businesses of the same class and category in a like manner." That means that Bar X with 600-seat capacity and Bar Y with 100-seat capacity both fill out the same form and answer the same questions when they apply for a license. Along with charging based on the kinds of music a venue may offer, venues of the same type are treated the same way and are charged based on what fire code says is their maximum occupancy.

"A BMI license runs between $600 and $9,000 annually," Bailey said.

But $9,000 can be a big chunk of change for a venue that is struggling. So some choose not to pay and hope they aren't found out. But PROs have a reputation for using covert practices to try and catch those venues.

"Someone will call posing as a customer and say, 'Hey, what's going on down there tonight?' We've trained our staff to tell [those callers] everything that's going on," Johnson said. "Then, at the end of the conversation, they'll say, 'This is so-and-so from BMI.' So by the end of the conversation, you know you're busted."

PROs don't just rely on hopefully tripping up a savvy server. They look to venue patrons to help them ferret out non-payers as well.

"The Internet is wonderful," Lee said. "Most users, most bars, most restaurants, advertise that they will have music. We find out a lot about music usage from the Internet and from newspapers. You go to the entertainment section in a local paper and see what bands are playing at what bars."

SESAC also has what it calls "licensing consultants" all across the United States, functioning like freelance field agents. They work from home and usually cover particular regions, areas near their homes that they're familiar with. A state with a denser population, like California, will have more field agents than, say, Wyoming. Those consultants spend their time e-mailing, calling and, on occasion, visiting venues that play music, making sure those venues are paying for the rights to use anything in SESAC's catalog.

PROs employ a more high-tech method of determining royalties from radio play to determine what amount stations have to pay. SESAC uses "survey systems" like Broadcast Data Systems to keep tabs on what radio stations are broadcasting. BDS monitors about 1,400 radio stations 24 hours a day, seven days a week. They use "digital fingerprint technology" to report back to SESAC on all of the songs a station has played. The information is then used to determine how much to pay, say, a writer whose song is climbing up the charts and in a radio station's rotation.

BMI owns the technology that runs Shazam, a music identification program. If you've ever seen an iPhone user hold his or her phone up to a speaker somewhere, and then say, "I knew it!" you've probably seen him or her using Shazam. BMI has a big building down near its Nashville, Tenn., office with banks of screens on the walls showing when a song is being played on the radio. BMI has digital "listening stations" in large markets across the country (they license approximately 10,000 radio stations). If a station plays a song in BMI's catalog, the writer or performer of that song is going to get a check. Even if he or she is not a well-known performer but happens to get a song on the air.

Local musician Jeremy Jensen joined ASCAP—the ­American Society of Composers, Authors and Publishers—about 18 months ago. His band, the Very Most, has seen some moderate success with their music. They've made a couple of charming music videos and recently completed a four-EP deal with Indiecater Records out of Ireland and even performed there. They received positive reviews and are starting to get some attention. So he joined ASCAP. It was a simple process: he went online, paid a fee of around $30—ASCAP charges a $75 processing fee for mailed applications—and in a few weeks, received a membership card in the mail.

Jensen's reasoning for joining was not so much about money. He felt being a member of a PRO offered some cachet.

"You get the sense, when you're investigating how to take your music career further, that you're not anyone if you're not a member of one of these organizations," he said. "I guess it's like a token of your professionalism to some extent. If you were to tell someone that was seriously considering using some of your music in a commercial for example, and you were to tell them that you weren't a member of any of these organizations, they would probably think, 'Oh. You must be really new at this,' or something like that."

Not long after joining, however, Jensen felt that the benefits from belonging to a PRO didn't outweigh the injustices.

"I just heard so many horrible things about what they do to venues," he said. "I hadn't really gotten much benefit out of it, and I didn't really want to be affiliated with these people that are making the world a worse place to live in. And I'm not really getting huge royalty checks anyway," he said. To the best of his recollection, he has received a total of $15.

So on principle, Jensen went back to ASCAP's Web site and tried to un-join, but couldn't find that option anywhere.

"They're kind of like the mafia," Jensen said. "They won't accept your resignation."

That, in a way, confirmed what Jensen feels is the biggest problem with PROs. From something as simple as not offering an opt-out button on the Web site to "strong-arm tactics" he believes PROs use to collect fees when a venue chooses not to purchase a blanket license, he feels they are contributing to "making the world a worse place to live in." He thinks the big guys could do more to help the little guys succeed.

Jensen doesn't object to PROs trying to make sure performers get paid, of course, but he thinks suing a venue is a lose/lose proposition.

"I think it could more easily go by something like a percentage of profits maybe. Why go after a venue who's not making any money and put them out of business?" Jensen said.

Salt Lake City-based musician Cameron Rafati sees Jensen's argument a little differently. But he can afford to.

Almost from the minute Rafati left the profitable world of commercial real estate a few years ago to pursue music full time, he made a conscious decision to approach his music—and himself as a musician—as a commodity. Joining ASCAP was a no-brainer for him. Like Jensen, he joined to help his credibility, but also to guarantee that he would get paid if his music was played somewhere. And he made sure his music was played. Shortly after releasing his self-titled debut, Rafati started pounding the pavement looking for avenues to license his songs for television and movies (areas where PROs charge much more for rights). Joining a PRO was an insurance policy for Rafati that he'd get paid if someone did pick up his music. Someone did.

Rafati's song "Battles," off of his 2009 debut, was recently licensed for use in the new Tyler Perry movie, Why Did I Get Married Too?, which stars Janet Jackson and is now in theaters. But Rafati is the exception to the rule.

The case against the bar in North Idaho is still pending. Court documents show that the owner of the bar is choosing to represent himself, but with 23 plaintiffs listed—including Taylor Allison Swift—that may not be the smartest course of action.

It may seem like a strike against the little guy, but it's really a double-edged sword. Put simply, some venues say they are getting priced out of existence by licensing fees. If there aren't any venues, then there's nowhere for a musician's music to be played. But if the venues don't pay those licensing fees, the musician doesn't get paid. Not even Taylor Swift.

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