Music licensers back fee cuts for some operators; NRA, CRA contend than new proposal does not address the concerns of all restaurateurs

Music licensers back fee cuts for some operators; NRA, CRA contend than new proposal does not address the concerns of all restaurateurs – National Restaurant Association, California Restaurant Association

Alan Liddle

WASHINGTON – Thousands of small restaurants, bars and retail outlets using televisions and radios for background tunes – and larger competitors with simple sound systems – could see their music licensing headaches disappear if legislation proposed by politically embattled performing-rights organizations is enacted.

Working in concert with the National Licensed Beverage Association, three of the groups that collect royalties and negotiate intellectual property rights on behalf of performers, the American Society of Composers, Authors and Publishers, Broadcast Music Inc. and the Society for European Songwriters and Composers – ASCAP, BMI and SESAC – are proposing a federal bill to amend the U.S. Copyright Act.

Under the proposed legislation, restaurants and bars with total gross leasable space of less than 3,500 square feet and retail outlets of less than 1,500 square feet would not be subject to royalties for copyrighted background music from radios and televisions. Larger restaurants and retail locations would be spared licensing fees if they operate no more than three televisions with 55-inch or smaller screens – no more than two such sets would be permitted in any one room – or if they use a radio receiver powering no more than four speakers in any one room and six speakers in all.

Executives at the National Restaurant Association and the California Restaurant Association, among others, contend that restaurateurs should not have to pay royalties for copyrighted background music from radios or televisions because the stations broadcasting that entertainment have already paid licensing fees.

Some in Washington see the licensers’ action as an attempt to head off more restrictive reforms being championed by the NRA, state restaurant organizations and numerous other nationwide and regional business trade groups. The NLBA and licensers characterized their alliance as a logical, negotiated settlement to a long-running feud.

Asked if he thought the music licensers’ proposal was an attempt to “divide and conquer” licensing reform advocates by offering legislative relief to some businesses but not all, California Restaurant Association executive vice president Stanley Kyker replied, “Of course.”

Word of the NLBA-licensers pact touched off a hurried series of closed-door meetings in Washington, where the NRA has worked throughout the year with a coalition of 30 business organizations to line up more than 100 sponsors for two national licensing-reform bills. The NRA-endorsed bills are HR 789 and SB 1137.

“The NLBA, which was part of a coalition that had been around for more than a year and had been lock-stepped on these licensing issues, broke away from the coalition and came up with its own deal with the music-licensing societies,” NRA legislative representative Katy McGregor said. “The proposal they came up with was not satisfactory to the restaurant association or the coalition, and the NRA will continue to work to ensure that the entire foodservice industry is represented [in any reforms] and that the interest of all operators are addressed in the legislative forum.”

Based in Washington, the NLBA is a trade group representing alcoholic-beverage retailers.

Opponents of the licenser-NLBA proposal expressed concern that the measure might speed through Congress if supporters were successful in attaching it to an existing copyright-act-extension bill “with legs” – a term applying to legislation that has completed its obligatory public hearings.

By negotiating a pact with music licensers that ignores the needs of larger companies while addressing the concerns of some smaller businesses – concerns that often rally lawmakers to the side of reform – NLBA officials have angered some counterparts in foodservice.

Critics charge that a fuller package of reforms might be harder to push through Congress and state legislatures if the NLBA endorses a measure that leaves larger companies on the hook for broadcast-music royalties and ignores allegations that some licensers engage in questionable business practices.

“We’ve been stabbed in the back,” a restaurant association lobbyist, who asked not to be identified, said.

NLBA leaders see things differently.

“I’m very proud that NLBA has chosen negotiation and resolution of many longstanding issues over continued fighting. These historic agreements will mean tangible improvements for tens of thousands of retail businesses,” NLBA president Jim Simpson said in a prepared statement. “More important, they bring an end to years of misunderstanding and open the door to a future of productive dialogue and negotiation on legitimate concerns of music creators and music users.”

In his prepared statement, BMI president Frances W. Preston said of the pact, “The NLBA has taken a leadership position and approached us with a workable compromise that both clarifies licensing standards and maintains the original congressional intent of exempting mom-and-pop retail and food-and-beverage establishments from copyright responsibility.”

“Our agreement will increase efficiency for all parties by establishing uniform, verifiable standards and greatly reduce administrative costs and the need for litigation,” Preston continued. “We look forward to working with the NLBA in securing sponsorship and quick passage of this legislation.”

The California Restaurant Association’s Kyker acknowledged that the NLBA-licenser-backed bill could ease the worries of some operators.

But he stressed that the measure will not deter his organization from pushing forward with a reform bill it introduced at the state level earlier this year.

“It does address many of the questions we raised in terms of background music, but it does not address the issue of `double dipping’ on royalties [for broadcast music] or the difficulty in obtaining [copyrighted works and pricing] lists,” Kyker said of the licenser-supported bill. “It also does not address the arguments in our proposed legislation that the manner in which [rates] are set needs to be clarified and it does not address the issue of how [licensers’] representatives must treat operators.”

For his part, Kyker is not convinced that the licensers’ proposal will short-circuit attempts to win other reforms.

“Many people, including some in Congress, believe this proposal might open the door for more concessions,” he said.

Reports of representatives of licensing entities harassing mom-and-pop business owners who play home-style radios for background music in their small stores, bars or restaurants have fueled outrage among some federal and state lawmakers in recent months and helped win passage of reform bills in nine states.

Critics of licensing groups have maintained that, at times, some of the organizations are secretive about the fees charged to different businesses with the same market are vague as to which performers they represent; and are tolerant of agents who try to ntimidate restaurateurs or their employees who are unfamiliar with licensing laws or who demand more information.

Because the licensers file litigation in New York, they also are accused by reform advocates of “strong-arming” compliance from business owners in other regions who believe it would prove cost-prohibtive to challenge assessments in East Coast courts.

The licensing groups have denied engaging in questionable business practices and refute accusations of wrongdoing on the part of their feld representatives.

Only adding to the licensing controversy are certain past court rulings holding that – depending on the size of the business, its location and the sophistication of the audio equipment used – some establishments do not have to pay royalties on broadcast music.

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COPYRIGHT 2004 Gale Group