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Mu$ic and local bu$iness

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“It’s a Legal Matter, Baby”

“We fully support the local music scene and the right of songwriters and musicians getting paid. Ninety percent of the artists we feature are playing original music, not covers. In the long run, how does taxing our music scene help these artists?” -Gene Beck, owner, Nocturnem

“Using music in a business is a business decision. It is a very powerful tool to drive profits. In my mind, there is something fundamentally wrong with taking something that doesn’t belong to you and using it for your own benefit.” - Ari Surdoval, BMI

The next time you walk into a business, listen carefully. Do you hear music? Depending on the type of business you are visiting and how they use music, they may be paying for the right to play it in their establishment. If they’re not, they could be in violation of U.S. copyright law.

Performing Rights Organizations (PROs) are responsible for monitoring the public performance of copyrighted music on radio, TV and in businesses and distributing royalties for the use of that music to their clients, the copyright holders. The big three PROs are ASCAP (American Society of Composers, Authors and Publishers), BMI (Broadcast Music, Inc.) and SESAC (Society of European Stage Actors and Composers). You’ve probably seen those acronyms in CD booklets or on LP covers.

ASCAP represents works by Madonna, Bruno Mars, Foo Fighters, Led Zeppelin and Tom Petty. Some of BMI’s artists include Pink, Stevie Ray Vaughan, Adele, Elton John, Eric Clapton, AC/DC and Maine musicians Mark “Guitar” Miller and Chris Ross. SESAC recently added Bob Dylan to their roster, which also includes Neil Diamond, Rush and Lady Antebellum.

The three PROs are vigilant about protecting the works of their clients. The familiar term “All Rights Reserved” means the public performance of that music outside a normal circle of friends or family is prohibited without a license. The law applies to bars, restaurants, fitness clubs, coffee shops and most any other establishment that uses copyrighted music as an enhancement to the business or as a way to draw customers.

As many local business owners and managers have discovered, obtaining a license from ASCAP, BMI or SESAC has become a necessary part of doing business, not unlike updating the liquor license or paying state sales tax. Still, they have questions about how those fees are determined and how (or if) the royalties they pay are distributed to the copyright holder of the music featured in their establishment.

Larry Killam is general manager of Sea Dog Brewing Company in Bangor. At the Sea Dog, you’ll hear recorded music throughout the day and evening, live music on Friday night, a DJ on Saturday night and karaoke on Thursday (each starting at 10 p.m.). Sea Dog in Bangor has a license with each of the three PROs. “We received a couple of notices in the mail from BMI followed by a threatening letter from an attorney,” Killam told me. “We looked into it and paid it and have been paying ever since.” Fees vary from business to business depending on the size of the venue and how the music is used. “Our ASCAP fee is roughly $1,500 a year,” Killam said. “We just got a notice of an increase of 3.52 percent. We also pay BMI and SESAC about $750.”

During my research for this article, a common question among local business owners has been, “How do they come up with the fee, and where does that money go?” According to Killam, “Their methodology of determining the fees seems a little ‘out there,’ and I don’t know how they come to those figures. When they get the money from us, how do they distribute it?” he asks.

Ari Surdoval is director of corporate communications and media relations for BMI. I asked him to respond to some of the questions from local business owners, including Larry Killam’s concerns about the methodology used to determine fees and the distribution of those fees to BMI’s clients.

“There has been substantial improvement for determining those fees and figuring which songs are played and when,” Surdoval explained. “Some of the information is proprietary, and for competitive reasons we can’t reveal exactly how we do it.” Surdoval told me that BMI is a not for profit organization and says that 86 percent of the royalties they collect from radio, TV and businesses large and small are distributed to the copyright holders they represent, with $789 million in royalties paid in the last fiscal year.

“We recognize that it’s not a ‘one size fits all’ thing,” Surdoval said. “A 6,000 sq. ft. nightclub with floors and a cover charge has a different use of music than a coffee shop playing classical music on the radio; their fees are calculated accordingly. Occupancy is a factor in determining fees as is the type of music being performed - we determine if it’s live, karaoke or background music from CDs,” he explained.

But how do they know which songs are played and who should receive those royalties? During our conversation, I presented Surdoval with a scenario. “Let’s say I have a bar that is licensed with BMI, so I’m covered legally. I allow my employees to play CDs day and night - they pick their own music based on the crowd, mood, etc. How can you accurately determine which songs we played?” Surdoval responded, “That’s the beauty of the blanket license. It’s a very economical and fair way to be covered for all the music you play. It protects the establishment owner from frivolous lawsuits from someone alleging copyright infringement. The alternative is for the bar owner to personally contact all of the songwriters and ask permission for public performance of their work. That’s impossible. With the license, they’re covered.”

What about local artists whose original songs are represented by BMI? Brett Settle, owner of Giacomo’s in downtown Bangor, told me that he believes more venues would voluntarily pay their PRO licenses if they knew that some of the money would be distributed to local songwriters. “You’re coming in and telling me I have to pay up or else. We don’t really know where that money goes. They claim it’s going to the artists, and we’re supposed to believe that,” Settle said.

Looking out for the little guy is also a concern for Gene Beck, owner of Nocturnem Draft Haus in downtown Bangor. “We fully support local music,” Beck told me. “How do I know these people playing original music are going to see anything from BMI or ASCAP when they play their songs here? I’m guessing they don’t.”

I contacted several local songwriters and asked if they have ever received a royalty statement for public performance of their music on the radio or in local businesses. Some of them have played original BMI-represented songs in area bars, and at least two of them have been featured on the radio in the Bangor area. None of the local artists I spoke with has received a royalty check from BMI. When I mentioned that fact to Surdoval, he asked me to share some information with them about a new division of BMI called BMI Live.

“The quickest and most efficient way for them to receive compensation from us for live performance of their work is to go to www.BMI.com/LIVE and sign up,” Surdoval said. “We’ve spent a lot of time developing it, and it’s been in existence for about a year. This allows performing songwriters to input their set-lists along with the date and location of the performance and receive a royalty payment. BMI wants to pay as many songwriters as possible.”

John Dobbs, owner of Paddy Murphy’s Irish pub in downtown Bangor, told me that as a former law student he researched the subject of music licensing extensively. “They send you a letter and if you balk at it, they send an unknown patron or a ‘ghost customer’ into your establishment and they record the music that you play,” he told me. “They derive their authority from a 1930s lower court ruling. It’s iron-clad and you can’t get around it. From what I understand, once they have you on their radar, they don’t let you go and if it goes to court, they don’t lose.” When Dobbs opened Paddy Murphy’s, he received a notice in the mail. “In short, it said 'You have to pay us or we’re going to sue your pants off.'”

Dobbs does not dispute the fact that songwriters and composers deserve to be paid, but he does take issue with the methods used to obtain those fees. “They use these unbelievably strong-arm tactics and have come up with this crazy rubric for determining royalties,” he said. “It’s like, 'You owe us this amount of money and if you don’t pay it, we’re going to take you to court and you know we’re going to win.' I wish there were some other system for me to put money in musicians' pockets,” Dobbs said.

While speaking with Ari Surdoval from BMI, I played him a portion of my interview with John Dobbs and gave him an opportunity to respond.

“We license 650,000 different businesses,” Surdoval said. “Roughly 200 times per year, BMI winds up in legal action with a business. The last place we want to be is in court with a business. And those we do take to court, do you know how long we have tried to work with them? Two or three years. Yes, after years of attempts on our part to collect, there is a chance they will end up in court. That doesn’t sound like a strong-armed tactic. Even after we can document with 100 percent certainty that a business has violated federal copyright law, we will still give them a chance to pay and avoid going to court.”

Gene Beck of Nocturnem has concerns about fairness in relation to which businesses are complying with the law. “BMI came here - at least I assume they did,” he told me. “I received a letter with a seat count followed by many phone calls demanding payment. Did they single me out because I was brand new? Is everybody who does live music in this town - and there are a lot of us - are we all subject to the same rules and regulations? If my neighbor can get away without paying fees, how is that fair to me in any form?”

I asked Beck about his personal contact with BMI. “They were reasonable once I spoke with them one on one,” he told me. “But they called several times and talked to the employees. That is not cool - you don’t do that. They kept hounding me and I told them the matter was with my lawyer. My attorney came back to me and said that it is above board. He said BMI has every right to do this. Subsequently, I had to pay my lawyer and another $800 or so to BMI.”

Brett Settle of Giacomo’s agrees with Beck and Dobbs. “As I understand it, when they zone in on a business, they don’t let you go,” he said. “I’ve never seen action taken for non-payment of a license, but I have heard of a lot threats and harassment both on the phone and in person.”

Brent Slater is an attorney with Gross, Minsky & Mogul, P.A. of Bangor and has represented clients who found themselves on the receiving end of a letter, phone call or visit from one of the PROs. “The law is very clear - if you play the music, you owe the money,” Slater told me. “Not only do you owe the money, but if goes to court, you’ll owe penalties plus attorney fees. I think most lawyers who represent businesses involved with entertainment recognize this and tell the client, 'You’ve got to pay it.' It’s a lot cheaper than going to court and losing.” Slater told me his clients were threatened with a trip to court, but none of them got that far. Regarding Surdoval’s claim that BMI will work with businesses for up to three years before taking them to court, Slater said “That’s been my experience. They really do try to be cooperative.”

As for allegations of rudeness and harassment from reps of the PROs, Surdoval could only speak for BMI, but told me that if a business feels they have been treated unfairly by a rep for the company, they should contact BMI directly and share as many relevant details as possible.

“BMI has tremendous respect for small business owners,” Surdoval said. “When people don’t want to communicate with us, they receive letters. The last position we want to be in is some sort of contentious situation with a business owner. When we hear about a small business saying, 'I want the money to go to musicians and songwriters,' but they still balk at their license, how else do they want to do it? Do they want the government to take over? Do they want it done by a private, for-profit organization? Do they want it done like the I.R.S.? I can’t imagine a more fair and equitable way to license for the music you use than the way BMI does it. I know some people don’t want to pay anything if they can avoid it and yes, things are tight, but things are also tight for the people we represent.”

I gave ASCAP several opportunities to comment and respond to the information in this article. Multiple calls to the office of Vincent Candilora, senior VP of licensing for ASCAP, were ignored.

Mike Dow is part of 'The Mike and Mike Show' airing each morning on Kiss 94.5. Catch up with him at www.Facebook.com/MikeandMike and www.MikeDow.net.

Last modified on Wednesday, 22 February 2012 16:04

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  • Comment Link Mark Wellman Thursday, 07 March 2013 10:26 posted by Mark Wellman

    Excellent article. Thew revelation of the BMI Live category should be used by all musicians playing their own songs as directed. Perhaps a followup with ASCAP or SESAC to learn if they make the same options available is warranted.

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