After a 30-year run, the owner of the Sacred Grounds Coffee House in San Francisco has shut down the Thursday night open mics. Mamma Llama, a small coffeehouse in Weaverville, Calif., no longer features musicians from near and far. Open mics at the Ragged Edge Coffee House in Gettysburg, Pa., are down from 50 to 60 audience members to no more than 15 these days.

These grass-roots music events, spawning grounds for the next generation of musical talent, have come up against the demands of US copyright law, as enforced by a handful of companies who act as collection agents for songwriters and composers. The law states that no performer in a public venue can present someone else's copyrighted music without their permission and, usually, without compensating them. A number of agencies, chief among them Broadcast Music, Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP), charge music venues an annual copyright "license fee" ranging from $300 to nearly $10,000 for the privilege of presenting someone else's music.

Much of the music at those Ragged Edge open mics was written by the performers, but there was also cover music from the likes of Bob Dylan and the Grateful Dead. ASCAP wanted a license fee of $900 a year from Ragged Edge owner Jake Schindel. He paid up and, to recoup that expense, started charging a cover fee, which caused attendance to dwindle. He was losing money, stopped paying the fee, and has cut back his musical offerings to unadvertised – and often poorly attended – events.

Bruce Schrader, who owns the Sacred Grounds Coffee House, tried to keep his open mics going by having his performers sign waivers stating they were playing only their original songs. Nevertheless, he was faced with demands for $6,000 in license fees from the agencies and had to shut down the weekly event last year.

"Their argument," Mr. Schrader said, "was that I couldn't possibly know whether the performers were singing any of the millions of copyrighted songs they represent, so I'd better get a license if I didn't want to get sued."

As soon as Mamma Llama owner Steve Friedman agreed to pay ASCAP an $800 annual fee, two other agencies demanded license fees. So he just stopped offering live music. "It was impossible to have the music without getting continuous calls and e-mails from these guys demanding payment," he recalls.

Smaller music venues around the country are struggling to pay these licensing fees. Many simply get worn down by repeated demands from the agencies for payment and threats of costly lawsuits and simply drop live music offerings altogether.

"It's killing the local music scene," laments folk musician Spook Handy, who's seen performance venues in his hometown of New Brunswick, N.J., drop from around 40 in the mid-1980s to half a dozen now. "We're not bringing up a new generation of musicians. They just don't have places to play."

There's general agreement in the music industry that the number of small venues offering live music is declining, although it's not clear how much of this is due to enforcement of copyright law.

Vince Candilora, ASCAP's vice president for licensing, says the fees are set at a "very good rate," adding, "What gives anyone the right to use someone else's property, even though they're not making money on it? I can guarantee you the phone company's going to charge you whether you're making money or not."

Despite this tough talk, there has been a softening in fees: ASCAP lowered its rates for the smallest venues last January, down from around $1,000 a year to $350, closely matching BMI's current rates.

And there's the possibility of more reductions: The Memphis-based Folk Alliance, an advocate for up-and-coming artists, is negotiating with BMI to cut fees even further. BMI is receptive to the idea, according to Alliance negotiator Renee Bodie, and she hopes new rates will be in place in the next six months and that ASCAP will match any new BMI fees.

"We're discussing ways to give these smaller places a break," acknowledges BMI spokesman Jerry Bailey. "We realize they're helping to support the next generation of performers."

If that's the case, BMI has some fence-mending to do. Coffeehouse owners complain of intimidation tactics. Bailey says lawsuits are threatened, and sometimes pursued, only when BMI has proof that violations of copyright law have occurred.

One southern California coffeehouse owner, who asked to remain anonymous, said he was able to get his total annual fees down to $1,000 from three agencies by telling them he wouldn't open unless he got rock-bottom rates. That was 10 years ago. He's still in business, but not happy about having to pay even those fees: "We're the people who give performers their start, and we have to pay for the privilege."