Club Owners Need To Inspect What They Expect

Isn't it amazing how an organization hires and entrusts its manager to look out for its own best interests and then doesn't check to make sure it's interests are being protected? So many club owners are totally unaware of the consequences of hiring a "Karaoke Pirate." For those of you unfamiliar with the term, a Karaoke Pirate is someone who thinks it is OK to illegally download karaoke music off the internet for free (or from an unreliable source) and use it to run a commercial karaoke show (or many) for profit. I run it to it time and time again. Karaoke shows are a dime a dozen everywhere you go. An at least 9 out of 10 (probably more like 99 out of 100) of the karaoke hosts have not purchased a single legitimate karaoke CDG.  But now that everyone is running their shows from a computer, it can be difficult to tell the honest Karaoke Host (KJ) from the not so.

What that means to you as the owner of a night club trying to make ends meet or the Board of Directors at the local club is that you could be potentially liable for millions of dollars in damages and not even know you're at risk of being sued. But because there are so many people downloading songs and infringing on the rights of the karaoke manufacturers (not to mention the song writers themselves), the major manufacturers that have not gone belly up are on the prowl searching for venues like you who are hiring "Karaoke Pirates". And at least one has determined that there seems to be more money in suing than in producing new music.

Why are you responsible for the actions of these people that have no concept of fair play? Well, let it be said that the whole idea of having karaoke in your establishment is to bring people in to eat, drink, and have fun. The more fun they have, the more they eat and drink. And the more profit you make at the cash register. It's called commerce and it is illegally using other people's intellectual property for monetary gain without their expressed knowledge or just compensation. While that might sound harsh, that's just the facts.

The problem stems from not inspecting what you expect. As a club board member who is responsible for the longevity of the club for its members, you are responsible for making sure that the club operates in a legal manner. You are responsible for making sure your payroll taxes are paid. And your sales taxes. And your lottery proceeds are reported. But yet you let your manager choose the karaoke host who will perform for the cheapest rate, thinking that everything is just fine. WELL IT'S NOT!

There are legal karaoke hosts out there who have not only paid for quality equipment to run a show just like the Karaoke Pirates. But they also pay for an extensive music library purchased with the blessing of the manufactures because they got their fair share of the sale. At 99 cents average per track, the investment in an extensive library can be high - sometimes $20-30,000 for a KJ that has been investing in music for a while. Can you honestly look at your KJ and tell yourself that they can actually afford a library with 200,000 songs in it?

The next time a Karaoke Host stops by and asks to do a show at your establishment, instead of first asking how much and settling for lower than the last guy - Ask him/her to show you the library of disks they have for their show. The manufacturers require a 1:1 ratio of original (paid for) tracks for each and every track on each and every hard disk. Do they do more than one show at a time? Then they need more than one copy of each song.

Karaoke is a fun time for people. Some say it is the largest spectator sport in the world.  I would argue the largest audience participation event anyway. And don't let this frighten you into thinking that it's just not a good idea to run Karaoke shows. The point here is to "Inspect What You Expect". Ask the KJ to show the discs. Make a trip to see them if you must or make him bring them to you. Ask how many songs he has. If it's more than 20,000 and he runs his show from computer, be suspicious.

But remember that there will be someone at sometime in your audience that is working for the manufacturers and is taking notes. If he doesn't see discs, he will not ask to see them. He will take what he sees back to the manufacturers who will list both the KJ and your club as litigants in a trademark infringement lawsuit. It will be up to the KJ to prove he owns the tracks. It will be up to you to prove you had no idea that what he was doing was illegal. Being ignorant of the law is usually not an excuse.

There is one other thing to mention here. The manufacturers are not the only ones getting hurt by the Karaoke Pirates. Yes, the songwriters and publishers for sure. But even closer to home - The Karaoke Host that you turned down because his price was a little higher than what you were willing to pay. But don't you now think that a little more now is definitely a lot better than the possibility of a huge lawsuit later?

Gem Series Answers the Call For Computer Versions Of Karaoke Songs

Karaoke hosts all over the country have been up in arms for quite some time. It is a long painstaking task to "format shift" all those CDG's to MP3+G. But by doing so, they can be more easily used on computer to make the karaoke experience much better for the customers. They have also had to deal with the fact that the karaoke producers have been on the warpath with karaoke pirates who download all their songs for free on-line and  have been targeting legal hosts in the process. At a show, there is very little way for a karaoke host to prove (short of carrying the discs that they seek to leave home) that he/she is actually paying for the songs on their computer or downloading them illegally.  This has become a sore issue on some of the front running karaoke forums of late.

While karaoke manufacturer Sleptone Entertainment dba Sound Choice has been actively seeking to rid the industry of illegal hard drives with 100,000+ song titles, they have apparently also been listening to the people that have been keeping them in business for the last 20+ years. As such, they have made an attempt to smooth the feathers they've been ruffling. This has not been an easy task.  It remains to be seen whether their latest attempt to again make karaoke a viable industry for the manufacturers as well as their paying customer (the legal KJ's) will work.

The GEM Series from Sound Choice is a collection of all of the currently available songs from the Sound Choice Library. It includes approx. 6000 songs and is available in set quantities from 300 on up.  The series has been converted to 320 KPS MP3+G files which is the best, but largest, of the the mp3 compression formats. The series is being made available only to professional karaoke hosts. The program provides all the songs on disc, but requires the KJ to agree that he/she will not allow anyone to copy the files, will not run more than one show per collection purchased (1:1 ratio), and will make their library available for audit by Sound Choice at any time.

This last requirement has the karaoke forums buzzing. The hosts who advocate legal libraries are relating this effort to illegal search and seizure, invasion of privacy, and to the IRS' authority to inspect your bank accounts for no reason at all. Are they correct? Do they have a point? Is there anything that Sound Choice can do to deal with the issue and appease the masses at the same time? The thought of allowing anyone access to personal information on a computer is disturbing. After all, we go to great lengths to shield this information from the internet hijackers. On the other hand, when it comes to intellectual property, do we really purchase anything but the disk, the cassette tape, or the paper in the book?

The copyright laws for intellectual property are very clear. When  you purchase an album of music, you are purchasing the right to use that music for your own personal enjoyment. You can move it to your mp3 player so you can take it with you, but you cannot give it to your friend to copy. The same is true when you download that title from the internet. If the copyright holder has not been compensated for the purchase of that track, then it cannot be legally sold to you. You may remember the famous case against Napster. The legal answer would be the same for any site that allows you to freely download any and all songs - it's not legal! The law is also clear in regard to using those same tracks for a commercial purpose. You can't do it! The jury has ruled in the past on format shifting for personal use. It's still out on format shifting for use in a commercial venture. But Sound Choice is at least saying they have no problem with format shifting as long as you buy the discs and only format shift them for one show for each set purchased. You must keep the discs and you cannot use them after you format shift for anything other than an archival copy.  If you run more than one show, you have to purchase one copy of the disc series for each show. For the new series, you have to keep the series discs together, so two rigs means two different copies of the entire series purchased.

Sound Choice claims that for every song that they paid rights for and produced, from 10 to 100 illegal copies have been made. Because they are one of the best at producing karaoke tracks (as defined by the number of illegal tracks in existence and as evidenced by the proclamations of the karaoke hosts themselves) Sound Choice claims they have lost many millions of dollars, have had to cut their staff to bare bones, and are unable to create new tracks for the near future. In order to remain viable, they have taken the reigns and are suing KJ hosts, and venues for running karaoke shows with illegally obtained tracks.  They do this by sending investigators into shows to observe the host running the show from computer instead of from disc. (I have found no evidence that they are suing Karaoke hosts that run their shows with illegally obtained disc copies). Those that do and display the Sound Choice Logo are sued and must prove that they actually own the original discs that the music came from. If they don't have them, they are given a choice of purchasing the whole collection or going out of business. Anything else means they will be prosecuted for trademark infringement. If they are successful, then you can be sure other manufacturers and copyright holders will be standing in line.

If it works, this new program has a great benefit to Sound Choice. The legal KJ's that agree to buy the new series will be registered users who will sign a contract and will display a sticker that proves that their library was legally obtained from the manufacturer. Those same KJ's are the ones that have already purchased their libraries on CDG. It's still up in the air on whether they will do any kind of buy back of those discs. Otherwise, legal KJ's will be making a double purchase of at least a portion of their libraries. Good deal for Sound Choice, but bad for Hosts. It may also keep many older businesses that have accumulated a large collection from getting involved in the program.

Now comes the other side of this scenario. Sound Choice is hoping to get KJ's who have been pirating their music to come over to the other side. They would like them all to purchase the GEM series (which is a great deal compared to purchasing the CDG's) and become legal. They also hope that it will deter those who are not willing to pay to give up the business. But you and I both know that isn't going to happen.

Even with the new program becoming popular with the Professionals in the field, Sound Choice will still be dealing with the same issues they have been to date. Those that choose not to purchase and register will still do what they have until they are hauled into court and forced to prove that they are legal. Those that are legal will just get mad and stop using Sound Choice music at their shows. Those that aren't legal will agree to quit in order to avoid costly prosecution. Some of those will turn around, change their name, and do it all over again.

Sound Choice has made a valiant effort in their attempt to survive. To go out of business would mean that the industry would be losing another great manufacturer. We have lost many over the years. Some because of issues like this, others because they chose to ignore the law themselves and got caught.  If they continue to try to clean up the industry in order to survive, then only time will tell if they will be successful. The Gem Series is an attempt to control the use of their products. I hope that the legal KJ's begin to realize that the only difference between the contract they must sign to purchase this series and what they have been doing all along is that they are now not the only ones policing themselves. Those that don't follow the rules will be weeded down, but probably not out!

IS YOUR KARAOKE HOST SUBJECTING YOU TO TRADEMARK INFRINGEMENT LITIGATION?

   If your club runs a karaoke show, you owe it to yourself to do more than just hire the next guy/gal through the door that claims to have a quality karaoke show. You could be subjecting yourself and your club to needless litigation by being proactive in your entertainment hiring.

This is the age of digital information. Computers have certainly made a lot of things easier in our lives. Look at what they have done for your business. As a bar, restaurant, tavern owner/operator, computers have allowed you to enter menu orders into a terminal that send the order to the kitchen to be prepared, allows you to keep track of what the customer has ordered, allows you to add desserts to the order even though the check was already printed. I'm sure there are many other ways the computer has made your life easier.

It's the same way for the karaoke host who runs your show every week. Carrying CDG's to every show was laborious job. Now he carries all his songs on a laptop computer that weighs in at 8 lbs. He can find any song by typing in a portion of the title or artist name. He can print out books, keep his rotation in order, add music in between singers, and even keep a history of songs for each singer for the next week's gig.

But is that same karaoke host (we'll call him KJ) putting you at risk for a law suit? WHAT????? you say? Yes, that KJ could be sued for violations from copyright law to trademark infringement if he has not purchased discs from the manufacturer of those karaoke songs. With computers comes the ability to download files off the internet. Some have found that they can convert those discs to files and then make the money back they paid for the discs by selling the digital files to others on the internet. Others have found that they can make easy money putting all those files on a hard drive and then selling it on Craigslist or Ebay for a couple hundred dollars. For each disc that the manufacturer sells with the expectation of making a profit, there are anywhere from 10 to 100 illegal copies of that song in circulation, being used by KJ's and individuals, some without any idea they are doing anything wrong. Remember NAPSTER? They paid millions in fines for allowing people to illegally download from their site.

So how does this affect you? The law states that if you know or are in a position to know that your KJ is illegally obtaining his(her) music, you could also be sued. And the fines can reach $150,000 per song to $2,000,000 per infringement. That's not saying anything about the possibility of losing a liquor license for willfully engaging in illegal activity. Scary, huh? Well, yes. But there are things you can do about it.

The first thing you can do is resolve to only hire KJ's that have a manufacturer's disc to back-up every song they have on their hard drive. How can you be sure? At least ask the question. I have and can show you that I have a disc for every song on the drive. And that includes the regular CD music that we play as a DJ. But what about the KJ that has more than one show going on at different locations? Well the law says you must have one disc to back up one copy on hard drive. That means two shows = two sets of discs.

But my KJ doesn't use a computer. He has all his songs on a player that doesn't use discs! A company by the name of CAVSUSA came up with a way to put karaoke songs on a player that didn't use discs. The CAVS players hold several thousand to 100,000 songs. They were sold with the songs but not the discs that kept them legal. None of the manufacturers sanction a CAVS player which is essentially a hard drive system without having a copy of the original discs included in the sale.

HOW DO THE LAWSUITS WORK?

The major force in protecting the interests of karaoke manufacturers is Sleptone Entertainment. Sleptone is the creator of one of the best and most renowned karaoke disc series in existence today - Sound Choice. Because of the digital age and the fact that they are a preferred manufacturer, Sound Choice contends that they have lost millions of dollars to karaoke piracy and are not sitting still. They are taking a proactive approach to stopping the illegal use of their music and the Sound Choice Logo.

Sound Choice has paid up front (as all legal karaoke manufacturers do) to the copyright holders (songwriters and producers) for the right to record the songs used in karaoke. Because they don't use the soundtrack from the original recording, they have paid musicians to re-create the songs that are as close to the original as possible. And they have been very successful at it as to be the most sought after. With all that upfront cost and the fact that 90% of the recordings in use have been downloaded for free, you can see why they are doing something about it.

Investigators have been scouring the country, going to karaoke shows. (They could be at yours any night of the week.) They will not let you know they are there. They may even sing at the show or just choose to sit and watch or start friendly conversations with the regulars. They will watch and see if the Sound Choice Logo is displayed on the monitor. Since many venues (that's your place) like to show the lyrics for the crowd, this makes the investigators job that much easier. He will make a list of Sound Choice songs that are being played. He won't have any problem knowing that discs are not being used because most karaoke pirates will be glad to explain how they got their music for free. (Remember I said Ask!)

  

Without a word, the investigator will leave and then the fun starts. The KJ, you and several others that got a visit in your area will receive a notice that you are being sued. While this doesn't necessarily mean that you will be taken to trial, it will mean that you need to respond, either yourself or through your lawyer. The KJ will have to produce the discs that were played that night and most likely even have to submit to a full blown audit of his systems. If it is found that you own the discs and the KJ is just working for you - then you are the one that needs to respond.

WHAT CAN YOU DO TO PROTECT YOURSELF?

Well, one thing you could do is stop running karaoke. But that's not the answer because you have a crowd of people that come just for that reason. If you stop, they will only go someplace else. But there are a couple other things you could do to keep you in compliance:

1. As mentioned before - ASK for compliance from your KJ. If he/she cannot comply by showing you their libraries on disc, then find another KJ. 
2. Register with the Sound Choice Safe Harbor Program. It is designed to help you by requiring the KJ to fill out a form and register with Sound Choice also before you hire him. He/she can't or won't - find someone else.
3.  Join The K.I.A.A. or other Association to combat Karaoke Piracy - They will also want you to require your KJ to register.
4. If you are the owner of the karaoke library - make sure you are in compliance and don't hire a KJ that will circumvent the system. Make sure you have the original discs if you're called for an audit.

All of these will help you protect yourself from lawsuit. If you do any one of them, you will probably keep your venue from being included in the actual lawsuit. But there is another side to any story and this one has another side too.

By sending investigators into these venues, Sound Choice has subjected their best customers to the inconvenience of the proving that they are in compliance. They don't know who to sue, so they sue everyone. That makes some guilty until proven innocent. While it serves their purpose, it tends to make KJ's think twice about using Sound Choice music at their shows even when they are legal.

By registering with the Sound Choice Safe Harbor Program, they say they will guarantee that they will not sue you if you follow their rules. But many legal KJ's consider the tactics used as an invasion of privacy. Using this method could mean you can't find a legal KJ to do your show.

Registering could also be like putting a target on your back and then providing Sound Choice a map with an arrow to your location on it. You are almost assured of a visit.

Karaoke is Big Business! At last report about $10 billion per year. Those of you that have held shows for a while know that it is popular with customers of all ages.

Many legal KJ's consider conforming audits to be an invasion of privacy. They think the Sound Choice is overstepping it's authority with the people that have faithfully paid them top dollar for their music. Now, subjecting those same people to audits and lawsuits to eliminate them is a violation of their privacy. They see the Safe Harbor Program and mandatory audits to join the K.I.A.A. a slap in the face and an attempt to "grab up the backfield and throw them out until you find the one with the ball". I personally don't know how this dilemma will play out, but somewhere along the line, I guess we all will have to prove our innocence to solve the issue of Karaoke Piracy.

 

Ridding the industry of illegal activity is important in order for manufacturers to continue to provide the best selection of music and keep it updated with the newest selections. Undoubtedly, it will cost all of us a little bit more to keep the karaoke pirates out of our establishment, but isn't it worth it to know that you are doing everything you can to run the quality establishment that you put all your hard work and money into? I know I sleep better at night knowing I'm doing it the right way. And I guess the only way to truly prove you're legal is to "prove you're legal"!

By the way, your disc jockey operates under slightly different rules. There is not intermediate for the cd's a DJ should be using. The BMI/ASCAP fees you pay each year protects both for the playing of the music and they do police the industry themselves. But Karaoke has to conform to the trademark laws because of the fact that the lyrics are displayed on a monitor or TV. Synchronization rights are not a problem for a DJ unless he is playing videos during his show.