A look at ASCAP & BMI – How the music licensing scam works:
If you own a nightclub or any other business where there is music playing – even on a television – you have probably been “shaken down” by ASCAP and/or BMI. These two groups are the licensing agencies for hundreds of thousands of copyrighted songs. They allegedly make sure the artists who create the music receive their “fair share” of royalties. It is nothing more than a scam.
Here, for the first time ever in print, is the true story about these corrupt organizations. It is a story I have been working on for over five years. During this time I have been threatened, cajoled, and offered “financial opportunities” in order to persuade me to leave this story alone. It is one of the largest grafts in the country, and these greedy agencies are very protective of what they are, in effect, stealing.
Some back history:
ASCAP (American Society of Composers, Authors and Publishers) started in 1909, and was incorporated in 1914. In those days, a composer like Stephen Foster would practically starve to death while music publishers sold his music and kept the money. In those days, it was mostly sheet music and rolls for player pianos that were sold. Composers didn’t get anything out of this. ASCAP was supposed to help composers get their royalties, but the organization soon became a racket.
By the late 1930s, ASCAP comprised only 1,100 writers and 140 publishers. To gain admission to ASCAP a writer had to have published five hit songs, a requirement that kept new writers out in the cold. Likewise, the system favored established publishers, about 15 of whom controlled 90 percent of the most-played songs on radio.
Country artists had access to the public through the Grand Ole Opry, broadcast over Nashville’s WSM since 1925, and a few artists became nationally known, but membership in ASCAP eluded them. Country stars such as Gene Autry and jazz greats like Jelly Roll Morton were rejected for years by ASCAP.
By 1940, radio broadcasters got fed up with ASCAP’s escalating demands for fees, which rarely went to the songwriters and artists anyway, and rebelled. Many radio stations quit playing licensed music, and refused to pay ASCAP. For several years radio stations played “Blue Danube” and other traditional songs that were considered public domain. Instead of helping composers, ASCAP practices actually kept their music from getting radio airtime. ASCAP fell into disfavor because they were seen as counterproductive to the music industry, while exacting a heavy toll from all involved.
Then in 1940, BMI (Broadcast Music Incorporated) was formed to counter ASCAP. BMI’s purpose was to provide an opportunity for those writers and publishers unable to gain entry into ASCAP, and to provide an alternative source for broadcasters and venues. It was hoped that BMI would do a more honest job, and that songwriters and everyone else in the music business would profit. It was not to be. The same kind of greedy vultures that operated ASCAP soon took over BMI, and it simply became a competing scam.
Where the money goes:
The major amount of license money for both groups comes from something called “Public Performance for Profit” and any venue that uses music for profit – nightclubs, restaurants, even supermarkets that play Muzak – has to pay a fee.
These fees are supposed to be distributed to the artists whose songs are being used in these “Public Performances”. That is supposedly why these entities exist. But the payout doesn’t work that way. Instead, the largest recipient of ASCAP money is the organization itself, their lawyers, and their representatives, who are paid a commission to “shake down” small businesses across America. All of the money goes to lawyers in New York City, and most of it stays there.
ASCAP and BMI pay royalties based on the radio airplay of a select group of corporate radio stations of their own choosing. They distribute some royalties to the composers and songwriters who they choose. The money is not distributed based on “public performances” – but on arcane formulas devised by BMI and ASCAP. So what happens is, the band plays a Willie Nelson song, the money goes to ASCAP, and they pay Brittney Spears or the estate of Michael Jackson. It’s absolutely fucked up.
ASCAP’s policies are determined by its 12-member board of directors (who are elected by the membership), and votes cast in their elections are weighted according to the amount of money paid that year. So, if you did not receive royalty money from ASCAP last year, you cannot vote this year. Because of this, it is unlikely that changes to make sure new writers and publishers get a fair share will ever come from within ASCAP.
As a recording artist or composer, you could have The Original Soundtrack of the Second Coming of Christ, the Attending Angels singing backup, Elijah on the Front, Moses doing Promotion, and confirmed tour dates, and never collect one penny.
During the past ten years, ASCAP and BMI have become more aggressive in their collection (extortion?) techniques. For example, when a nightclub owner signs the papers to pay ASCAP or BMI royalties, he actually signs away his right to protest. This would be illegal in any other kind of contract, but ASCAP received the stamp of approval of the US District Court in Manhattan – which has been their pet court for decades.
If the owner of a business ever pays ASCAP or BMI one time, he had better pay them forever, because he has signed a self-renewing contract that never ends. He has agreed to pay them from now on. This is why ASCAP often sues businesses who quit paying them, but seldom sues businesses who never pay.
Read this excerpt from the ASCAP contract that club and restaurant owners sign:
“The term of this Agreement shall be for a period commencing on the date hereof and continuing indefinitely”
Unlike any other legal contract, the BMI and ASCAP contracts say that they can raise the price at their own discretion, and there isn’t anything the business owner can do about it. Here’s another excerpt:
“The Society shall have the right to adopt from time to time such systems, means, methods and formulae for the establishment of a member’s apportionment and distribution of royalties as will assure a fair, just and equitable distribution of royalties among the membership.”
So, ASCAP and BMI can charge whatever they want, raise their prices any time, and you are on the hook forever.
Lately, both groups are trying to work together, and they have gone after karaoke, jukeboxes, and internet music providers. BMI and ASCAP’s argument is that, since most musical compositions are registered by one or the other, an establishment must buy licenses from both to protect it from copyright-infringement lawsuits.
Not many establishments are willing to talk about their licensing situation, and neither BMI nor ASCAP will release a list of licensed establishments. But chances are that a large number – perhaps a majority – of bars and clubs in our area are unlicensed; and many are currently being approached by ASCAP and BMI demanding money. Another licensing group called SESAC, which represents mostly gospel and country music, also uses the same strategy and tactics.
BMI and ASCAP charge a sliding scale for licenses: The smaller the venue, the smaller the fees. That means it really doesn’t matter how many customers you have, you pay for the size of the bar. In Texas, where everything is bigger, we pay more. ASCAP and BMI are the reason why many of the large dancehalls that used to be a fixture in Texas have closed down forever. These places used to have one or two big nights a month, but sat empty most other nights. They couldn’t afford to pay ASCAP and BMI for all of the empty seats, so they finally closed their doors.
In the local music scene, where performances are often found in nontraditional and low-revenue spaces, the fees can be difficult for the bar owner to justify. For example, a bar with a 250-person capacity that has a live band once a week, plays CDs at some other times and allows dancing (which prompts a higher fee than music played as mere background), would have to pay over $6,000 annually to BMI and ASCAP.
High-handed tactics:
A lady named Jessica Hill published and copyrighted “Happy Birthday To You” in 1935. While the copyright should have expired in 1991, copyright has been extended and the copyright for Happy Birthday is now due to expire in 2030. The copyright lies in the hands of Time Warner. Happy Birthday’s copyright is licensed and enforced by ASCAP, and the little ditty brings in more than $2 million in annual royalties.
In fact, ASCAP has over 40 arrangements of Beethoven’s Moonlight Sonata on file, and even more amazing, nearly 80 versions of Row, Row, Row Your Boat. Thus if you had a nightclub and no ASCAP license, and their spies caught someone performing one of those pieces, even though the song is in the public domain, since an ASCAP publisher has copyrighted an arrangement of the song, you might still be sued.
In 1995 ASCAP sent letters to 6,000 summer camps, including the Girl Scouts, informing them that they had to pay royalties for “public performances.” Copyright law defines a “public performance” as a place “where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” ASCAP did not specifically say that it wanted to charge for singing around the campfire, but Girl Scout leaders are still afraid to sing “Puff the Magic Dragon”. Other songs they stopped singing after the ASCAP threat included “God Bless America” and “This Land is Your Land”.
“They buy paper, twine and glue for their crafts – they can pay for the music, too,” said John Lo Frumento, ASCAP’s chief operating officer. “If offenders keep singing without paying” he said, “we will sue them if necessary.”
One club owner says ASCAP is “the Mafia of the music world and there ain’t a thing you can do about it. Tell them to go to hell and pull all their music from the song list, they’ll bring in spies to your location. If you have a band, DJ or Karaoke machine that plays any one of the songs on their list, the send a very threatening letter. They’re parasitical and counterproductive to venues, musicians and composers alike.”
Refusals and arguments can eventually lead to lawsuits, and the club always loses, often to the tune of tens of thousands of dollars in fines plus legal fees. Attempts by club owners to post “No ASCAP material to be performed here” signs or to ask that no musicians perform ASCAP material have not always worked.
ASCAP and BMI have agents on payroll who travel from club to club, incognito, as spies. When a new venue starts offering live music, the agent will either show up in person or write a letter demanding money. If a nightclub or even a convenience store refuses to buy the license, then ASCAP or BMI will send in the spies – often local musicians – who will make notes and testify in court as expert witnesses that on a certain date at a certain time a certain song was indeed played. Even though the hired musicians decide what is played, it is the owner of the establishment where the music is played who gets sued.
They get paid over & over:
Licensing also applies to the playing of radios in public places. If a radio is playing in a public place such as a restaurant, a clothing store, or a hotel lobby, and the radio station happens to play a licensed recording, that too counts as a public performance and royalties must be paid.
Under this strange system, ASCAP/BMI gets paid many times for the same music. They get paid by the songwriter, who has to join ASCAP or BMI (and pay annual dues) in order to receive royalties. They also get paid by the recording artist, who has to pay for “mechanical reproduction rights” to record the song. They get paid again when the radio station buys the CDs. They get paid again when the radio station pays their broadcasting license fees. And they get paid again when the store or restaurant playing the radio for its customers pays their licensing fees. Everyone all across town playing this song on their radios, anywhere that the public can hear it must also pay.
This is a truly insane situation—with ASCAP and BMI agents running around town, busting taxicab drivers for playing their radios to their riders, fining dry cleaning establishments for letting their customers listen to music while in the store, and hassling bartenders for letting their patrons listen to music or watch TV (all of the music on TV is licensed as well.)
In order to provide some relief, the Fairness in Music Licensing Act of 1998 exempted some retail establishments, restaurants, and bars from paying fees for playing radio or TV broadcasts, so long as they were smaller than a certain size and had no more than a certain number of speakers for playing music. ASCAP and BMI both opposed this legislation. It was sponsored by the late Sonny Bono. Unfortunately, only a few businesses are protected under this law – most must pay. And even if you are exempt under the Bono law, the ASCAP or BMI representative isn’t going to tell you. He is still going to try to get you to pay.
If you find yourself speaking to an ASCAP representative on the phone, he or she is going to use the word “federal” a lot. Many people have reported that they were under the impression that ASCAP is some sort of quasi-federal agency. This is something they are trained to do, in order to intimidate you.
What can a business owner do?
If the ASCAP/BMI people start threatening you, there are only a few options: You can tell them to fuck off, but eventually – if they think you have any money – they will sue you. You can tell them you can’t afford it, and promise to pay them whenever you can. I know one club owner that put them off for 15 years with this ploy. You can cancel all music and entertainment except for bands that play originals. Or you can hold your nose and pay the bastards.
Conclusions:
Other types of publishers do not have the same kind of racket going. For example, anyone can read a book in public, and there is no group demanding money to distribute royalties to book writers. Anyone may quote from a speech, and the speechwriters association can’t make them pay. The images displayed on a television aren’t licensed, but the background music is? It’s ludicrous that the music licensers have managed to get by with such a massive scam for so many years.
These licensing groups are nothing more than gangsters extorting money from working folks to give to the few, chosen, and wealthy. They personify what is wrong with the music business, and they are the primary reason for the decline in live music performances over the past few years.
I hope some courageous politician will someday sponsor a bill that makes these predatory scams illegal, or at least forces them to distribute the royalties they collect in a fair and equitable manner.
