America needs Copyright Reform.

The Fairness in Music Licensing Coalition (FMLC) represents small businesses and organizations in the hospitality industry impacted by music licensing fees.

Problems with PROs

Several core problems exist in the way performance rights organizations (PROs), like ASCAP, BMI and SESAC, assess and collect music licensing fees from small businesses. These include:

1.      Size vs. Receipts: “Gross square feet” instead of “gross receipts”

The “small business exemption” to the public performance right uses “gross square feet” as the metric to determine the size of a business. PROs also use gross square feet to calculate the total cost of blanket license fees.

Using the gross square feet of a business premise to measure the size of a business is an imprecise methodology. The “gross square feet” metric fails to account for spaces on the business premise that are non-public, like preparation and storage areas where music is not played.

Instead of focusing on “gross square feet”, the small business exemption should be modified so that small businesses in the hospitality industry are measured by their gross annual receipts. This metric would provide a far more accurate description of the size of the business that should be subject to music licensing fees. This is the same metric used by the Small Business Administration (SBA).

Small businesses in the hospitality industry, as defined by the SBA, should be included in the “small business exemption”.

2.      Outdated technical factors complicate the small business exemption

The “small business exemption” for public performances is outdated and too complicated.

Currently, the exemption has multiple qualifying factors for businesses with a premise greater than 3,750 gross square feet of space. These factors include how many total speakers and televisions a proprietor is permitted to have on the business premise, along with restrictions on how many speakers and televisions are permitted in a single room of the premise. There is even a restriction on the maximum inch size of the televisions used on the business premise (“no…diagonal screen size greater than 55 inches”).

The factors describing electronic equipment are both confusing and outdated. They were drafted into law in 1998, which was three years before Apple Inc. began selling the iPod.

Congress should remove the technical requirements defining the electronic equipment a proprietor must have in order to qualify for the “small business exemption”.

 3.      Too many PROs are permitted to collect fees from small businesses

FMLC members are often confused and frustrated when they receive multiple bills for blanket music licenses. Many small business owners get three music licensing bills per year – one from each ASCAP, BMI and (increasingly) SESAC. They typically ask, “why am I being charged for something that I thought I already paid for?”

PROs respond by saying that different songwriters are represented by different PROs and that music users can search a vast database of songs to figure out which songs are owned by the different PROs. This response affords small business owners no practical utility.

Regardless of how many PROs exist, FMLC members would like to see all music licensing fees charged under a single music user license. This would eliminate the confusion about which songs the various PROs own and provide transparency about how music licensing fees vary amongst the different PROs.

Congress should require that only one PRO can be empowered to collect reasonable music licensing fees from small businesses.