Analysis

Topic: Copyrights and Musical Works
Sponsor: Senator Rogers
Date Ordered Enrolled: December 18, 2000
Date of Analysis: December 28, 2000

Position: The Department of Consumer and Industry Services supports the bill.

Background: Federal copyright laws require that payment to the copyright owner for the privilege of playing a song. This applies whether a singer performs the song, by radio television, or on tape or compact disc. The consequences of failure to obtain a license can be serious and can result in large fines and damage awards in some cases. The easiest way for a business to obtain permission to play a song is to negotiate with one or more performing rights societies. Performing rights societies represent songwriters and publishers and their right to be compensated for having their music performed in public. By contracting with one of these organizations for a blanket license a restaurant, bar, or other music user can legally play any song in the organization's repertoire. More than 80% of the license fees collected are distributed as royalties to performer and publisher members of the societies.

The three largest societies are: the American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music Incorporated (BMI), and Society of European Stage Authors and Composers (SESAC). The repertoire of copyrighted songs for both ASCAP and BMI includes over 4 million works. All three organizations maintain searchable databases. The three organizations are recognized in the United States Copyright Act of 1976. ASCAP is the oldest of the three organizations and was founded in 1914. BMI was founded in 1940 and SESAC began in 1930. SESAC began as a repertory of European and gospel music, but it has expanded to include popular music, jazz, Christian music, and other contemporary music as well.

Many bar and restaurant owners have been visited by individuals claiming to represent ASCAP, BMI, and other organizations who own the rights to the music being played in the establishment. These individuals assert that the establishment owes money, sometimes a lot of money, for the right to continue playing this copyrighted music. They typically offer no documentation that they represent the organizations they say they do. At the same time, paying one individual for the rights to songs gives no guarantee that someone else won't show up demanding payment for the right to play songs not covered in the contract with another organization.

This bill was originally introduced in the last legislative session. In its original form it would have required the Department of Consumer and Industry Services to license individuals representing the performing rights societies. This aspect of the bill has been dropped in House Bill 4937.

Bill Content: The bill creates the Music Royalty Practices Act. A performing rights society is required to maintain an electronic computer database of its repertoire. The society is also required to establish and maintain a toll-free telephone number. A copy of its most current lists of copyrighted musical works and members must be provided at cost to any person upon request.

A performing rights society may not enter into or offer a contract to a business unless it has provided the following information to the proprietor at least 72 hours in advance:

· Rates and terms of royalties under the contract,
· Notice that the society will provide upon request a schedule of rates and terms of royalties under contracts executed by the society with comparable businesses within the past 12 months,
· The society's electronic address, toll-free telephone number, and other information required by the bill,
· Notice that there are exemptions that may exclude a proprietor from liability under the copyright laws,
· The opportunity to review in electronic form the most recent list of members or affiliates represented by the society, and
· Notice that the proprietor is entitled to the information required by the act and that failure to provide the information is a violation.

The bill contains several requirements for contracts between a proprietor and a society:

· The contract must be in writing and signed by both parties,
· Include information regarding the proprietor and the performing rights society and the duration of the contract.

Contracts must be offered for a term of 1 year, but the parties may agree to a contract for a term other than 1 year. This limitation does not apply to a contract for a term negotiated between a performing rights society and a trade association.

The bill contains a code of conduct for a performing rights society and its agents, employees, or representatives. Prohibited activity includes:

· Entering the premises for the purpose of discussing a contract without first identifying himself or herself to the proprietor.
· Collecting or attempting to collect a royalty payment or any other fee, except as provided in a contract.
· Using or attempting to use unfair or deceptive acts or practices in dealing with a proprietor, engaging in a coercive act or practice that is disruptive of a proprietor's business, and prematurely commencing or threatening legal action.

The code of conduct does not prevent a copyright owner from exercising exclusive rights granted under the copyright laws. A performing rights society or its agents, employees, or representatives are not prohibited from informing a proprietor of copyright obligations.

A person suffering injury as a result of a violation of the act may bring a civil action to recover actual damages and reasonable attorney's fees or to seek an injunction or other relief permitted by law.

The bill does not apply to contracts between performing rights societies and broadcasters or a law enforcement investigation of a suspected violation of Public Act 210 of 1994 (unauthorized duplication of recordings).

Arguments For: This bill will help thousands of businesses which play music by establishing a code of conduct for individuals representing the performing rights societies and by making clear the legal obligations of business proprietors and performing rights societies. The bill will also go along way in reducing the animosity which has often exists between the various performing rights societies attempting to collect royalties for their members and proprietors who may not be aware of the requirements of copyright law.

Arguments Against: The bill is unnecessary. Although there have been occasional problems between business proprietors and the performing rights societies, the current system works pretty well overall.

Supporters/Opponents: The Small Business Association of Michigan, the Michigan Restaurant Association, and the Michigan Hotel, Motel & Resort Association support the bill. ASCAP and BMI did not oppose the bill.

Fiscal Impact: There is no fiscal impact on state government.

Administrative Rules Impact: No regulatory or administrative rules authority is given to state government by the bill.