Businesses Must Pay the Piper for Sound of Music--Even in Elevators

The Belly Up Tavern had been open in Solana Beach for about four years when two well-dressed men visited owner Dave Hodges in his small office.

“They looked like Louie and Lefty,” recalled Hodges, referring to stereotypical characters in gangster movies. The duo, who introduced themselves as representatives of the American Society of Composers, Authors and Publishers (ASCAP), told Hodges that he had to immediately start paying annual licensing fees to ASCAP for the live and recorded music used in the nightclub--all of which was news to Hodges.

ASCAP and rival Broadcast Music Inc. (BMI) protect the performance rights of songwriters, who join one of the two organizations.

Copyright Law

Under U.S. copyright law, any business using music, including dance studios, aerobics classes, retail stores and hotels, must have the permission of songwriters for the use of their songs. Business owners can contract with each individual songwriter. Or they can pay an annual fee to ASCAP and BMI to use each company’s entire roster of songwriters.

Many business owners either don’t know about licensing fees, don’t like the amount of the fees or simply don’t want to pay the fee.

Seeing no reason to succumb to what he viewed as “strong-handed” pressure, Hodges at first refused to pay and told “Louie and Lefty” to get lost.

Hodges ignored two “friendly” letters from ASCAP. Then ASCAP sent him a letter, accented with another visit from the duo informing Hodges that he was about to be sued for up to $50,000 for each ASCAP song used by the Belly Up.

After consulting with an attorney, Hodges paid.

Now, six years later, it is unlikely that a club in San Diego County the size of the Belly Up would go very long without paying its fees.

Once the licensing firms regarded San Diego as a minor appendage to the Los Angeles market. But as San Diego has grown, so too has enforcement by ASCAP and BMI.

In March, 1985, ASCAP opened an office in Riverside to service Orange and San Diego counties. It was the first time the area received such attention from the company. Now ASCAP has one full-time representative exclusively in San Diego and another that splits time between Orange County and northern San Diego County.

BMI also has upped its coverage to at least one representative in San Diego at any given time, sometimes two.

Lawsuits Climbing

The number of lawsuits filed against area businesses has dramatically increased in the last three years. ASCAP currently has about 30 legal actions pending against businesses in San Diego; the smaller (representing fewer songs) and younger BMI is proceeding against five businesses.

“Three years ago there was probably half that number (of lawsuits) in San Diego,” said ASCAP’s John Kroninger, area representative for Orange County and San Diego.

Songwriters’ rights flow from U.S. copyright laws which in turn are derived from Article I, Section 8, of the U.S. Constitution, which endows Congress with the power to “promote the progress of science and useful arts, by securing for limited times, to authors and inventors, the exclusive right to their respective writings and discoveries.”

Copyright legislation was officially codified under Title 17 by Congress in 1947, although the first U.S. copyrights date back to 1790.

ASCAP was formed in 1914 to collect royalties for songwriters and music publishers. BMI went into competition with ASCAP in 1940. Both companies are nonprofit.

Any business using music--even elevator music and music on telephone systems--is required to have a license. There are few exceptions. A store with nothing more than a small portable radio probably wouldn’t require a license. And if a business subscribes to a music programming service, the service usually covers licensing costs.

Just about everyone else must pay for a license.

‘Music Not Free’

“Music is not something that is free,” said Stuart Davis, BMI’s regional license representative for San Diego. “It is a common fallacy that the airwaves are free, or that if you buy a record it is yours. When you are using music in a public business you must have a license.”

That’s where ASCAP and BMI’s representatives come in.

It’s their job to seek out businesses--by checking newspapers and periodicals, and generally hitting the streets--to find those not paying licensing fees. When a business is spotted, the first step is usually a visit from a ASCAP or BMI representative.

Once notorious for “Louie and Lefty”-type ambassadors, the meetings between businessmen and licensing representatives are far more genial than Hodges’ initial experience.

“It’s improved tremendously,” said Harry Florentine, administrative representative and second vice president of the San Diego-Imperial Counties Tavern and Restaurant Assn. “They (the reps) are not coming out as gung-ho as they used to. They’re coming out in a receptive way to introduce themselves.”

Still, few business owners are thrilled at the sight of an ASCAP or BMI representative walking through the door.

“I think, in degree of welcomeness, we rank one step above the county health inspector and the IRS auditor,” said Ken Harrison, ASCAP’s full-time field representative in San Diego. “Our job is to find them. We usually don’t have too many people calling us.”

A former disc jockey in area clubs and a three-year veteran with ASCAP, Harrison views his job as more education than enforcement.

“It is something that is legally required, but it’s not like the phone where you have to pay to get the service,” said Harrison.

If a business owner refuses to pay after personal visits and letters, the companies invariably will start legal proceedings against the business. “If someone asks me to sue, I’ll usually oblige,” Harrison said.

Monitor Songs

Private investigators are hired to monitor exactly what songs the business is playing. Penalties range from a minimum of $250 to a maximum of $50,000 per song, plus court costs.

ASCAP and BMI rarely lose in court. Those who challenge the companies usually end up fodder for blues songs--thousands of dollars poorer and a whole lot sadder.

“They have been challenged many, many times and they must win 99.9% of the cases,” said the Tavern and Restaurant Assn.’s Florentine, who now advises members not to fight the system. “The way the copyright law is written, it is almost impossible to prevail.”

Most cases are settled long before they reach a courtroom.

Fred Carter, owner of the Oakvale Lodge in Escondido, didn’t think he should have to pay both licensing agencies. Businesses are usually required to get licenses from both companies because each company represents different songwriters. ASCAP sued and Carter settled out of court.

“I was new in business and didn’t know anything about it,” said Carter. “My lawyer said there was no way to fight it, so I settled the case.”

“The typical scenario is that the owner is not aware that we’re serious,” Harrison said. “When he finally gets served it’s too late. He won’t get out for less than several thousands of dollars.”

Kroninger of ASCAP said that “eventually 90% of all businesses get licenses. Five percent go out of business before we get to them and the other 5% go to litigation.”

The licensing companies compute licensing fees differently, using complicated formulas, but with the same basic focus. For example, ASCAP bases its fee for a retail store on the number of speakers the store uses; BMI computes the fee by using the shop’s square footage.

ASCAP charges aerobics classes based on the number of students, and clubs and restaurants by the seating capacity and type of entertainment. BMI’s license fees for clubs and restaurants are based on the amount of money the club spends on entertainment.

The Belly Up pays ASCAP about $1,200 a year and BMI from $400 to $500. A stationery store in San Marcos pays ASCAP $239 a year. ASCAP’s fees are generally higher since it represents more songs.

Once collected, licensing fees go to royalties for songwriters and publishing companies, after ASCAP and BMI pay expenses. ASCAP and BMI monitor radio and television stations to determine how much a song is used. Royalties are rewarded to songwriters and music publishers based on the number of times the song is used throughout the world.

Paying Artists

“The checks come regularly, twice a year,” said San Diegan Nick Reynolds, one of the original members of the Kingston Trio. “It’s like free money, but it’s not.”

Reynolds didn’t write any of the trio’s big hits, which include “Where Have All the Flowers Gone,” “Greenback Dollars” or “Tom Dooley.” But he collaborated on many of the group’s songs, particularly rewrites of public domain songs, which earn him royalties nearly 30 years after the group’s heyday.

“Sometimes the check is for as much as $300 to $400 if a song is used on a television show in Sweden or Germany or something like that,” said Reynolds, a member of BMI. “But it’s usually about $100.”

There have been attempts to change the copyright law so that artists such as Reynolds would be paid once--and only once--for a song. Last year, two congressional bills would have ended the current royalty system, a move supported by many within the TV industry. But the bills died at the committee level.

However, new bills, HR1195 and S698--which, according to BMI and ASCAP officials, would accomplish the same thing, except with some minor provisions for royalties--have been introduced this year.

Such legislation would strike at the very core of the principles of both ASCAP and BMI, Harrison said. “The value of the copyright should increase as the value of the song increases,” he said.

Florentine of the restaurant and tavern association may counsel members to pay the licensing fees, but that doesn’t mean he likes the concept. He said the high licensing fees are one reason so many nightclubs are turning away from live music, which is expensive to produce and license. “I feel they should be lenient for businesses that are not doing well,” said Florentine. “There should be a license they can afford.”

Malcolm Falk can see the situation from both sides of the proverbial coin. As the talent booker for the Belly Up and other clubs, he is involved in the management end, which pays the fees. He also runs a talent agency and is friends with several songwriters.

“The fees are not so exorbitant when you look at how many songs and songwriters you get to use,” said Falk. “It costs us maybe $3 a day. From the artist’s point of view it would be impossible to make money (without the licensing agencies). It would discourage people from taking it up as a profession.”

Davis of BMI takes a philosophical approach to attacks on the licensing system.

“Our business will always be under some fire; it’s the nature of the business when millions of dollars are involved,” he said. “The majority (of business owners) do comply. It’s just a cost of doing business.”