Board Member Dean Kay Testifies on Internet Webcasts
ASCAP Music Publisher Board Member Dean Kay, President and CEO of Lichelle Music, testified before the U.S. House Subcommittee on Courts and Intellectual Property in Washington D.C. on June 15, 2000. Subcommittee Chairman Howard Coble of North Carolina presided over the hearing, which also featured testimony from Marybeth Peters, the U.S. Register of Copyright, and industry leaders from the music, motion picture, internet and legal fields including: Hilary Rosen, President-CEO Recording Industry Association of America (RIAA); Jack Valenti, President-CEO, Motion Picture Association of America (MPAA); Jonathan Potter, Executive Director, Digital Media Association (DiMA); Peggy Miles, Chairman, International Webcasting Association; Thomas J. Ostertag, General Counsel, Office of the Commissioner or Baseball, Edward O. Fritts, President-CEO, National Association of Broadcasters (NAB).
Below is a copy of Dean's testimony. ASCAP hopes to avoid any additional Congressional regulation on Webcasting at this point, as we successfully license websites using our members' music.
STATEMENT OF MR. DEAN KAY
on behalf of
THE AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS
HOUSE SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
June 15, 2000My name is Dean Kay. I am a member of the Board of Directors of ASCAP -- the American Society of Composers, Authors and Publishers. I am proud to say that I am both a songwriter and a music publisher. Some of you may have heard of one of my songs, "That's Life," which was an enormous hit and signature song for Frank Sinatra. I have been in the music publishing business for over 25 years. I served as COO of the Lawrence Welk Music Group, a major independent company, then as President of the U.S. division of the PolyGram International Publishing Group. I am now President and CEO of my own company, Demi Music Corp., and its affiliated music publishers, including Lichelle Music Company.
Mr. Chairman, let me begin by telling you how very much ASCAP's almost 100,000 songwriter and music publisher members appreciate this Subcommittee's sensitivity to and understanding of copyright concerns. Time and again, your Subcommittee, including members on both sides of the aisle, has shown how its expertise in copyright, developed over many years, has so well served our nation and our copyright community. In, for example, the enactment of the Sonny Bono Copyright Term Extension Act and the Digital Millennium Copyright Act, your hard work Mr. Chairman, that of the ranking minority member, Mr. Berman, and that of all your colleagues, has done great good. We in the copyright community rest easy knowing that, because this Subcommittee has jurisdiction over our concerns, we will get a full and fair hearing.
Now, Mr. Chairman, to the subject at hand. For the past eight years, I have immersed myself in the workings of computers and the Internet in an effort to understand how these new technologies interact with music. It has been my intention to use my extensive experience in the music industry to create a bridge between the industry's past and its future. On behalf of the talented songwriters and recording artists with whom I work, I have spoken at many events and consulted with those who are leading the way in the use of new technology to enhance the opportunities available to all in the music business.
I have been a member of ASCAP's Board of Directors since 1989 and I am currently Chairman of the ASCAP Board's New Technologies Committee. I welcome the opportunity to speak with you today about ASCAP and its successful efforts to license Internet performances of its members' vast repertory of copyrighted musical works.
First, let me give you some information about ASCAP. As I am sure most of you know, ASCAP is one of three performing rights licensing organizations in the United States, the two others being Broadcast Music, Inc. and SESAC, Inc. Today, ASCAP has almost 100,000 writer and publisher members and a repertory in excess of 4 million copyrighted works. ASCAP licenses, on their behalf, the nondramatic performing rights in their music.
The ASCAP repertory also includes the works of thousands of foreign composers and songwriters, members of foreign performing rights organizations with which ASCAP is affiliated. Last year, ASCAP collected over 560 million dollars in license fees (including more than 137 million from abroad) and distributed more than 85% of that sum to its members (and foreign societies) as royalties. You should know, Mr. Chairman, that we collect from abroad about four times what we pay out to our foreign colleagues. That is because American music is an export product. Indeed, if our nation's overall balance of payments mirrored that in musical performing rights, we would have a huge trade surplus rather than a deficit.
The right of public performance, granted to copyright owners by Section 106(4) of the Copyright Law, is one of the most important of all the copyright rights. It is the largest single source of income for songwriters, most of whom are not performers and do not benefit from concerts and recording contracts. From the time ASCAP was founded in 1914 by the leading songwriters, composers and music publishers of that era, including Victor Herbert, John Philip Sousa, Irving Berlin and Jerome Kern, our main objective has been to find those who are performing music publicly and to offer them licenses, at reasonable and fair fees, to perform our members' music. Our principal licensing tool is the blanket license -- a license to perform any or all of the works in the ASCAP repertory for which the user pays a license fee calculated on a mutually agreed upon basis.
One constant in our business has been technological change. With the advent of radio and commercial phonograph recordings in the 1920's, then background music services in the 1930's, television in the 1940's, cable and satellite television in the 1960's and 1970's, and now the Internet, ASCAP has faced the challenge of licensing new and ever-expanding industries which rely on music ‚ the "raw material" that we create and own -- as a principal source of entertainment to generate their revenues. When each new technology using copyrighted music developed, there was, of course, a period of marketplace give and take before the parties ultimately and inevitably reached a settled and mutually acceptable licensing regime.
I would be less than candid if I told you that all music users obey the Copyright Law or even cheerfully pay license fees for the property they use. Songwriters and publishers have been forced to fight courtroom battles with the background music, radio, television and cable industries, among others. While this has not been the course that we wished to follow, this history has produced a framework within which most license fees are negotiated between ASCAP and representatives of user industries, or sometimes determined by a federal court. This model for license fee dispute resolution is established by a consent decree, the Amended Final Judgment entered in United States v. ASCAP. Under the ASCAP Consent Decree, any user may obtain a license to perform the works in the ASCAP repertory merely by written request to ASCAP, and ASCAP can never say "no," as long as the user is willing to pay a reasonable license fee. If ASCAP and the user cannot agree on a license fee, the user may apply to the court for a determination of a reasonable license fee.
The fact is that each new technology using copyrighted music has presented not merely challenges, but opportunities both for those who developed the technology and those whose copyrighted property made the technology profitable. We must always keep in mind that, without the music which my writer and publisher colleagues at ASCAP create and own, and without all the other creative works such as movies, sporting events, computer programs, and books, technological marvels would be empty and unprofitable shells. Our creativity, our property, fuels their engines. The public -- the audience -- wants to enjoy what we create. When a technological development comes along which can provide our works to the public in a new way, we applaud it, and we want it to grow and prosper. Please understand that, the last thing in the world that we want is to shut down new uses of music; to the contrary, from our perspective, the more music that is performed for the public, the better. We simply want to be paid a fair fee for the use of our musical property, because, after all, our creative property is what makes these new technologies succeed. Therefore, we must all prosper, or none of us will.
Let me now turn to ASCAP and the Internet. In 1995, ASCAP set out to license the performances of our members' music in that new and evolving medium. We did so by creating a Department of New Media and Technology and formulating an Experimental License Agreement for Internet Sites on the World Wide Web. In its earliest form, the ASCAP Web Site License was a blanket license, granting the operator of a Web site that employed music access to the entire ASCAP repertory. The fee for the license was calculated as a small percentage of either revenues or operating expenses. In addition, for Web sites that could track and account for their transmissions of music, or ASCAP music, there were alternative fee rates that could result in reduced license fees.
As I have said, ASCAP began its efforts to license Internet performances of its members' music in 1995. By the end of 1997, we had only 125 Web sites licensed. But by December, 1999, the number of licensed Web sites had grown to over 1500. These include some of the largest entertainment Web sites, as well as the most popular aggregators of streamed music sites. Last year, for the first time, collections from Internet licensees reached almost one million dollars. And, importantly, ASCAP is the only performing rights society in the world that makes regular distributions of royalties to its members for Internet performances.
This past December, ASCAP began offering a new form of license agreement for Web site operators. Based on comments from many licensees and prospective licensees, we made a major modification in the new license, eliminating the operating expense-based fee calculation and replacing it with a fee that is based on Web site traffic. The new license also provides for simplified music use reporting, which we use in distributing royalties to our writer and publisher members for Internet performances of their music.
As part of our licensing efforts, ASCAP sought early on to make use of the new technologies. For example, the Web Site License was made available on the ASCAP Web site, www.ascap.com, where the potential licensee can also find "ASCAP RateCalc," an on-line, interactive program that calculates the license fee based on information provided by the licensee. In addition, we employ "ASCAP EZ-Eagle,"; a program that searches the Internet for Web sites that are transmitting music files and, therefore, are potential licensees.
The important message from these facts is that the free marketplace is working exactly as it should. ASCAP's licensing team, many of whom are with me today, is meeting continually with industry groups, including the Digital Media Association, and the operators of major music-using Web sites to discuss the issues and, perhaps, an industrywide license agreement, just as we have industrywide agreements with other user groups. We've had what we believe are some promising meetings with DiMA, and we hope they share our desire to continue in that vein.
In addition, many Web site operators, including radio stations and the bulk of the country's commercial television broadcasters, have requested ASCAP licenses for their Internet performances. We will use our best efforts to agree on license fees for these uses; if we and they cannot agree, the court will set reasonable fees under the consent decree. ASCAP has also entered into a number of partnership arrangements with leading players in the Internet world, designed to benefit our members by increasing exposure to their music and providing them with reciprocal services such as advertising and web pages.
What lies ahead both for the near term and the future for ASCAP's members and the Internet? Certainly, we watch with great interest and some trepidation the battles being fought today between our colleagues in the record and motion picture industries and their adversaries. These are the types of growing pains with which we are familiar from our own past experience, which I mentioned earlier. But, more importantly, our experience reflects the ability of reasonable people to work out negotiated solutions to difficult business problems. Compulsory license legislation is neither necessary nor desirable. The marketplace works.
ASCAP's Board of Directors, its management and its members do not fear the new technology -- we welcome the challenges it brings to us as the world's leading performing rights organization, to continue our efforts to protect the rights of creators and to ensure that they are fairly compensated for the use of their copyrighted works, and to benefit the public by ensuring the availability of the world's greatest music.
Let me conclude my remarks, Mr. Chairman and members of the Committee, by urging you to proceed with caution in considering whether to enact more legislation with respect to Copyright and the Internet. Certainly from the point of view of creators and copyright owners, I believe that in this arena, which changes from minute to minute, less is more. I remain confident that, as has been ASCAP's experience in the past, reasonable men and women can agree in the free market, a free market which is at the very core of America's values, on arrangements that will produce fair prices for valuable property -- fair license fees for performances of copyrighted music on the Internet.