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AMOA, ASCAP Suspend Digital Music Talks

Posted On: 3/25/2002

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LAS VEGAS - Leaders of the Amusement and Music Operators Association say they have hit a bump in the road on the way to creating a new type of performance license for downloaded jukebox music. As of March 7, AMOA's jukebox licensing subcommittee temporarily suspended negotiations with the American Society of Composers, Authors, and Publishers. At issue: licensing rates for operator use of digital audio files. However, AMOA negotiators say they are not discouraged and intend to resume talks with ASCAP after an indeterminate respite.

The two groups have been negotiating for about nine months as part of a broader effort to create a comprehensive jukebox license for public performance of downloaded music. AMOA remains in negotiations with two other performing rights organizations, Broadcast Music International and SESAC. However, most of the negotiations to date have been with ASCAP. AMOA leaders said they and ASCAP representatives have been unable to agree on rates and fees for operators to use digital audio files.

The final meeting (prior to suspension) with ASCAP took place March 7 in Las Vegas during Amusement Showcase International. "We made an offer; they made an offer; and there's still too much distance between the two," said Jim Pietrangelo, chairman of AMOA's jukebox licensing subcommittee. "So we agreed to take a break from negotiations. I am not discouraged. We simply said, 'let's sit back a little bit.'"

"Our talks have not stalled in totality," said Jack Kelleher, executive director of the Amusement and Music Operators Association. "We agreed to disagree. Our negotiations with ASCAP have been shelved until such time as we can regroup and come up with some alternative approaches to address the disparity in our ideas about the best rates. ASCAP empathizes with our dilemma and we at AMOA, likewise, understand their plight. Jim Pietrangelo has said all along we'd rather make no deal than a bad deal."

One source close to the negotiations said that each side has its own statistics to point to in bolstering its case for higher or lower licensing rates. AMOA points to the massive study of the jukebox market conducted by two University of New Orleans economists, and paid for in part by the PROs. This study was the basis for the rates that AMOA accepted in the negotiations two years ago to extend the Jukebox License Agreement for another decade.

But the PROs point to precedents for higher rates that were set by existing manufacturers of downloading jukeboxes. One source close to the negotiations commented: "The fact that these manufacturers did go around the PROs and make direct deals set something of a benchmark for pricing. Some of those pricing levels and play numbers cited at that time these factories made their deals with the labels were based on 'A' locations. Their numbers may have included free play, attract mode play, and so on. That probably sounded good for marketing purposes, but it creates a challenging environment for negotiating rates for digital music in the real world of average jukebox locations."

Despite the stalled negotiations with ASCAP, operators have good reason to remain optimistic about an eventual positive outcome for the talks with the PROs, Pietrangelo said. "We believe that we are in agreement with ASCAP on virtually every other point of the digital license," he stated. "It's strictly down to rates. But in our ongoing talks with ASCAP, it got to the point where we seemed to be going over the same issues and arguments in each meeting. Basically each side was trying to justify its preferred rates."

As many observers have pointed out, the larger world of downloading music is a fluid situation with new developments making headlines almost daily. In this rapidly changing environment, AMOA negotiators said they believed that a pause in their talks with ASCAP "just made sense at this time."

A comprehensive license for the public performance of 45rpm vinyl records and CD recordings on jukeboxes has been in place for 11 years under the auspices of the Jukebox License Office (Nashville, TN). AMOA regards the JLO license structure as quite successful , particularly since AMOA obtained a major price break for its members last year. However, the JLO's Congressionally approved charter bars it from licensing other forms of music storage beyond 45s and CDs.

As indicated, existing manufacturers of downloading jukeboxes, including TouchTunes and Ecast/Rowe, have separately negotiated their own unique, individual rate structures with each music label, bypassing the PROs in the process. But many AMOA members prefer to obtain music from third party sources, rather than relying upon the makers of digital jukeboxes to supply content as well. Thus the AMOA jukebox licensing subcommittee opened negotiations with the PROs in the summer of 2001, seeking to create a second JLO-type license that will permit such third party sourcing.

Pietrangelo said AMOA seeks a narrowly-focused agreement to give operators an affordable way to pay for public performance of digital audio files in a non-CD format. Most other capabilities created by hi-tech jukeboxes are not being negotiated, he said.

"We are negotiating for audio elements only that are encompassed in a regular CD jukebox," he stressed. "Other elements such as advertising, video, or various additional functions that a digital jukebox may perform, are not being discussed in our talks with the PROs. When we started our negotiations, we tried to address every capability in the world. We quickly learned it's impossible. If we attempted to agree on every possible future function that an online machine could perform, negotiations would drag on interminably. So we are seeking a narrowly defined agreement. Many of these additional functions, we believe, will fall into the location's agreements with the PROs anyway. Certain other non-music functions may require a separately negotiated license, and if that is the case, so be it. After we adopted this focused approach," he reported, "things moved very quickly."

AMOA's negotiating team consists of president Mike Leonard of Coin-Op Specialists (Adrian, MI); government relations committee chairman Russ Mawdsley Jr. of Russell-Hall Inc. (Holyoke, MA); AMOA first vice-president Rich Holley of Southeast Game Brokers (Tampa, FL), and Pietrangelo. In addition, Jack Kelleher is present at every negotiation. ASCAP representatives in the talks include Vince Candelora, Bonnie King, and Lorrie Hughes.