Lawmakers respond to broadcasters' complaints.

SESAC was in the cross hairs of a Congressional oversight hearing panel today (May 11), as lawmakers responded to complaints from broadcasters that when dealing with performing right organizations (PRO), it's either their way or the highway.

SESAC, by far the smallest of the three PROs, has nevertheless carved out a marketplace niche as the agent for much of the music used in major syndicated TV shows. As such, it commands more than 9% of TV public performance income.

Broadcasters, as represented by the Television Music Licensing Committee, say SESAC, a for-profit company, has a take-it-or-leave-it approach and that potential users have no recourse to third-party arbitration -- an independent mechanism to resolve disputes -- as does ASCAP and BMI.

Both of those PROs, which are non-profit organizations, are bound by the constraints of long-standing consent decrees that include provisions for rate court arbitration.

The committee's executive director, Will Hoyt, is asking Congress for legislation requiring SESAC and any other future PRO to offer a dispute resolution process.

In his opening statement, Rep. Lamar Smith, R-Tex., chairman of the House subcommittee on Courts, the Internet and Intellectual Property, said he has "not pre-judged this issue," but added, "I do believe that a balance must be struck between the rights of a copyright owner to be fairly compensated and the ability of a potential licensee to undertake a balanced negotiation process over such rates."

Speaking to Stephen Swid, chairman/CEO of SESAC, Smith asked whether the group could negotiate a dispute resolution process "out of fairness."

Swid replied that arbitration -- which often costs several million dollars -- would be too costly for the group. "It would put us out of business," he said.

Members of the committee also plumbed allegations by Hoyt that unlike ASCAP and BMI, SESAC has exclusive rights so that potential users cannot negotiate with individual composers if they're unhappy with SESAC's rate. Swid replied they are not legally constrained from doing so.

Also appearing on the panel were Del R. Bryant, president/CEO of BMI, and, representing ASCAP, Jonathan M. Rich, a partner with Morgan Lewis & Bockius.

Smith gave no indication that he was going to forge legislation at the present time to modify SESAC's operation, but ended the hearing by saying that he and his panel are "very interested in this issue."

Rep. Robert Wexler, D-Fla., commented that despite the complaints about SESAC, he doesn't think it's a good idea for Congress to introduce bills that, in essence, "rewrite contracts."

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