Performing Rights Organizations

By Shoshana L.

    Since the 1909 Copyright Act, copyright holders in the United States have held the exclusive right to the public performance of their works. A public performance occurs “at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” 17 U.S.C. § 110 (2006).

    Enforcing the copyright holder’s right presents a problem. To truly police this right, the holder must monitor a range of performance venues from strip malls to strip clubs. How could one individual, or a small group of owners, hope to enforce their rights against impermissible use across the United States?

Basics of PRS/PRO

    In the music industry, copyright holders are able to employ a type of collective rights administration called Performance Rights Organizations (PRO) or Performance Rights Societies (PRS).  Composers, lyricists and publishers join together as part of an entity which can negotiate licenses, extract royalties and monitor the enforcement of each member’s copyright when performed in public venues, TV and radio. Council of Better Business Bureaus, Music in the Marketplace, 12/14/2007, http://www.bbb.org/us/article/music-in-the-marketplace-3072. The first such group formed in 1914 under the name American Society of Composers, Authors and Publishers (ASCAP). ASCAP’S leadership of songwriters included many important songwriters of the day.

    The composer Victor Herbert, ASCAP’s first president, played the most important part in ensuring the survival of PROs. Mr. Herbert sued a restaurant called Shanley’s for performing his compositions on the piano for the entertainment of diners without paying any compensation to him. When the U.S. Supreme Court ruled upon the matter (in addition to a related suit against Hilliard Hotel Company), Justice Holmes remarked that “[i]f music did not pay, it would be given up. If it pays, it pays out of the public's pocket. Whether it pays or not, the purpose of employing it is profit, and that is enough.” Herbert v. Shanley Co., 242 U.S. 591, 595 (1917). Holmes’ comment, arguably vague, has been interpreted as establishing the legality of PROs, as PROs seek to ensure the profit from copyright goes to copyright holders. See 174th St. & St. Nicholas Ave. Amusement Co. v. Maxwell, 169 N.Y.S. 895, 895 (N.Y. Sup. Ct. 1918). Following ASCAP’s lead, but to represent different interests, two other groups have also arisen: BMI (Broadcast Music, Inc.) and SESAC (Society of European Stage Actors and Composers).

    The efficiency of PROs results from the use of blanket licenses. A blanket license grants a licensee the right to perform any or all the works in the PRO’s repertory. Council of Better Business Bureaus, Music in the Marketplace, 12/14/2007, http://www.bbb.org/us/article/music-in-the-marketplace-3072. Originally, PROs tailored their licenses to the medium and user. As a result of decisions regarding antitrust and unfair competition in New York and the Second Circuit, licenses today are non-exclusive, without discrimination in license rates terms or conditions among similarly situated users. ASCAP’s licenses are not considered a monopoly because artists retain the right and ability to license their works themselves, and ASCAP licenses do not discriminate in price between licenses similarly situated. U.S. v. ASCAP, 1940-1943 Trade Cas. para. 62,104 (S.D.N.Y. 1941). Similarly, when a Buffalo TV station challenged the blanket license in its region, the Second Circuit found options available in single-program licenses for use or source licenses with the copyright holders themselves. Buffalo Broadcast Co., Inc. v. ASCAP, 744 F.2d. 917, 933 (2nd Cir. 1984). It should be noted that ASCAP’s leading competitor, BMI, does not operate under such agreement so writers and publishers may be treated differently. Bernard Korman & I. Fred Koenigsberg, Performing Rights in Music and Performing Rights Societies, 238, PLI/Pat 9, 65 (1986).
   
Monitoring

    Each PRO monitors various public venues to seek out new licenses and enforce existing ones. Based upon the copyright statute, these public venues include restaurants, bars, clubs and hotels where live or recorded music is played; shopping malls; stores that play broadcast or recorded music; spas, gyms or other sites that offer exercise to music; trade shows; conventions; dance studios; skating rinks; private clubs or fraternal organizations; offices and stores that use “music on hold” for telephone customers; sports teams; colleges and universities; amusement parks; bowling centers; and the Internet. Also, businesses traditionally associated with the performance of music such as radio and television networks and stations, and concert promoters are tracked for non-dramatic performance of works. “Dramatico-musical works” are distinguished from “performing rights” and thus must be licensed directly from the copyright holder or a separate organization.

    Initially, ASCAP employed quasi-lawyer sleuths to uncover infringing establishments. In exchange for discovering infringement, the lawyer received the right to represent ASCAP in the case. This practice was criticized as verging on “barratry,” (the overzealous solicitation of legal work), in at least one case. Buck v. Elm Lodge, Inc., 29 U.S.P.Q. 444 (N.D.N.Y. 1936). The criticism led ASCAP to rely solely upon staff to search for infringing establishments, a practice also in place at BMI and SESAC.

    PRO staff members identify establishments through local advertising and other sources which indicate venues that publically play music. Sites which have not previously entered an agreement receive a visit from a field representative. The representative presents the owner with two options: purchase a license to continue using the work or face a copyright infringement suit. The sites which choose to agree to one of ASCAP, BMI or SECAC’s blanket licenses then must cooperate by handing over royalties. Local radio and TV stations generally provide representative samples from which the PRO can determine the number of uses of copyrighted works. Larger venues such as network TV stations and airlines provide complete logs of the music played.

Paying Owners

    Generally, the owners of the establishment which has entered a license agreement are responsible for handing over fees to the PRO. If an establishment pays a service to “pipe in” background music, as by playing a radio station, the service bears responsibility for paying license fees. The Better Business Bureau notes that federal courts have been rather strict in holding an establishment liable for payment. Establishments have attempted and failed to circumvent payment by claiming that performers were hired as independent contractors; or were not paid by the club owner and worked only for tips; or that the owner specifically instructed the musicians not to play copyrighted music; or not to play specific songs; or not to play music in the repertory of a particular performing rights organization; or even that the owner did not know the music actually performed was copyrighted.

    As PROs need money to operate, copyright holders receive a figure less than the performance license. First, PROs deduct operating expenses. The remainder is divided among members based upon two factors. The first measures the quantity of times a particular work is played, determined via a survey which quantifies the appearance of each piece of music at a given venue. The second quantifies the amount of the work performed. Where less than the entire work is used, as with a jingle or TV show themes, the performer receives proportionally less than if the entire song had aired. Korman & Koenigsberg at 74.

    Challenges to legality and fairness continue to be issues for PROs.  However, none to date have succeeded in proving price fixing or antitrust violations. Discontent did, however, lead Congress to enact The Fairness in Music Licensing Act of 1998. The Act, codified at 17 U.S.C. § 513, permits individual proprietors of 7 or fewer non-publically traded establishments in which non-dramatic musical works are performed publically to claim a PRO has demanded an unreasonable license rate or fee and to require the PRO to receive a reasonable license fee.