Mr. KASTENMEIER. Now we would like to hear from Howard Berman, the gentleman from southern California.

Mr. BERMAN. Thank you, Mr. Chairman. It is sort of nice to be back in this room. The last time I was here was on the other side of this, whatever this is, and it is more fun on this side.

But I want to welcome my colleagues to Los Angeles. You are not strangers to this city. In fact, Mr. Synar has been coming up here quite a bit lately and doing some recruiting in the area of candidates, maybe not from the industry but whose lives have been portrayed in the industry in recent weeks. And it is good to have you back.

And I want to commend you for holding this hearing, Mr. Chairman. It is a very significant issue before our subcommittee. And, I think, having this hearing in Los Angeles gives a chance for the parties most involved in the debate on this issue to be present. I take great pride in the fact that I represent on the subcommittee much of the community of studios and guilds, directors, producers, screenwriters, song writers, actors, cinematographers, all of the people involved in making films, all the collaborators that are so involved in enriching the lives of Americans and people around the world.

I do have grave concerns about trampling on the artistic integrity of the filmmakers' creation. I look forward to the testimony of the many talented witnesses who are scheduled to appear today to press a legislative approach to the issue of material alteration of films. I have been impressed by their sincerity and I have encouraged their efforts to develop practical solutions to the problems they face.

At the same time, I recognize that the creative process involves many different people in this whole endeavor. And we all know that the films would not be made in the first place but for the risktakers who provide the necessary financial stakes for these creative efforts to achieve fruition. As somebody mentioned, even Michelangelo needed the Medicis.

I remain open, as you might gather, on this kind of an issue to the prospect that there might be a legislative resolution of this debate which is workable and achievable. And I look forward to hearing from the witnesses and the work we will do after this hearing in trying to fashion, if possible, some kind of legislative solution. Thank you, Mr. Chairman.

STATEMENT OF CONGRESSMAN HOWARD L. BERMAN

ARTISTS' RIGHTS IN THE CONTEXT OF MOTION PICTURES

HEARING BEFORE THE SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND THE ADMINISTRATION OF JUSTICE

January 9, 1990

Mr. Chairman: I want to commend you for holding this hearing. the most significant issues to come before our am delighted that today's hearing provides the issue to be debated in Los Angeles.

The topic is one of Subcommittee, and I opportunity for the

The motion picture is a singularly American contribution to world culture; what is more, motion pictures are one of the most significant U.S. exports, contributing a net trade surplus in the billion dollar range each year.

I take great pride in representing on this Subcommittee much of the community of studios and guilds, directors, producers,

screenwriters, songwriters, actors, cinematographers, film editors, set designers, art directors, and all the rest of the collaborators on the films that so enrich the lives of Americans and people around the world.

The creative process by which the fruits of talented imaginations emerge as feature films is one which fascinates and impresses us all. But we all know that films would not be made in the first place but for the risk takers who provide the necessary financial stakes for these creative efforts to achieve fruition. Even Michelangelo needed the Medicis.

I do have grave concerns about trampling on the artistic integrity of the filmmaker's creation, and look forward to the testimony of the talented witnesses who will appear before us today to press a legislative approach to the issue of material alteration of films. I have been impressed by the sincerity of the artists with whom I have met, and have encouraged their efforts to develop practical solutions to the problems they face.

But at the same time, I am convinced that those who take the financial risk in making motion pictures must be able to exploit these films in many markets. Getting American films made is in the interest of the entire creative community, and, equally important, in the interest of the filmviewing public around the world.

I remain open to the prospect that there may be a legislative resolution of this debate which is workable and achievable.

I want to welcome my Congressional colleagues to Los Angeles, and commend to you the testimony of today's witnesses.

Mr. KASTENMEIER. I thank my colleagues for their comments. The Chair will say that we have four panels today. The witnesses will speak rather briefly, but their submissions in their entirety, which will be somewhat longer and more explanative, will be, of course, accepted for the record.

We would like to get through at least two panels this morning. Perhaps we can even get through a third panel. There are three witnesses in the first panel; two on each of the last three panels, so that we can see how we will proceed. But I did want to indicate to those people here how we are scheduled in terms of the hearing this morning.

I am delighted to call forward our first witnesses. We are very pleased to welcome back to the subcommittee Mr. Peter Nolan and Mr. Roger Mayer. Mr. Nolan is the vice president and counsel of the Walt Disney Co. and Mr. Mayer is the president and chief operating officer of the Turner Entertainment Co.

We are also pleased to welcome a new witness before the subcommittee, Mr. Charles FitzSimons. He is the executive director of the Producers Guild of America. We are delighted to have all three of you here. And you may proceed as you wish. Who would like to speak first-Mr. Nolan?

STATEMENT OF PETER NOLAN, VICE PRESIDENT-COUNSEL, THE WALT DISNEY CO.

Mr. NOLAN. Mr. Chairman and committee members. My name is Peter Nolan. I am vice president-counsel of the Walt Disney Co. I am pleased to be here today to represent not only the Motion Picture Association of America but Disney as well.

Mr. Chairman, in almost every city in this country and virtually all other nations of the world, consumers are watching, renting and buying American movies. The global market for American movies is exploding, thanks in large part, to the proliferation of the new video technologies. Video enables our motion pictures to go anywhere and everywhere.

Many of you passed the time during your flight to Los Angeles watching a movie adapted to video. A pay service provided in your hotel also allows you to order up recently released motion pictures. If you did not like the three or four motion pictures offered in your pay service, you had available to you free television. All of these require there to be a transfer by video technology.

Visit any shopping center and you will find movies recently in the theaters like Disney's "Who Framed Roger Rabbit" and Warner's "Batman" all available for rent and sale. Video gives millions of consumers the chance to see movies they may have missed in the theaters. Indeed, it is now clear that motion pictures in the video format make more revenues than the movies in theaters.

Video is also becoming essential to the business of making movies. It costs $20 to $25 million to make a motion picture today and 80 percent of these motion pictures do not make a profit in the U.S. theatrical market. Most producers must count on the subsidiary market-or I should say the primary market, the new primary market, of video to hopefully not only recoup their investment but to make a decent profit.

And it is not just here in the United States. Video markets are essential to us all around the world. Video deserves some credit for the film industry's $2.5 billion trade surplus, among the largest in all of U.S. industry.

Now, the consumers are happy. The U.S. film industry is flourishing. Indeed, we are dominant in the world. But there are those who say there is a problem. Some object to the way we producers, who own the film's copyright, adapt our films to video. They are using the term moral rights as a rallying cry for laws that would limit the copyright owner's ability to disseminate his works.

Producers find this mindboggling, quite frankly. We invest millions of dollars in advanced technologies which are applied skillfully and artfully to give the video viewer the best experience available on television.

We use some mysterious sounding processes like panning and scanning, time compression and time expansion. Some people make these terms drip with emotion, but really the truth is that for years, in fact for decades, we have customarily used these tools when adapting movies from the theater screen to the television

screen.

Some witnesses will argue that we somehow deface our films when we make these changes. That simply does not make sense. The people who work at movie studios like Disney take great pride in our motion pictures. We have a great love for the motion pictures, especially films that carry our own name. Disney, for example, does not put its signature on any film unless it is the best it could be.

The other MPAA members are equally as proud of their creations. And as businesses, we have no incentive to distort or mutilate or make our works less attractive to the consumer. It just does not make any sense.

Producers make only those changes demanded by the marketplace. We use these technologies because we are forced to by the marketplace. They are essential to compensate for the differences between film and video. It is also one of the underlying reasons why there is a copyright law in the first place, and that is to provide our culture with the best and most works available.

The copyright law provides incentives for the widest dissemination of creative works possible. This serves the constitutional objectives of the copyright provision in the Constitution, promoting public access to cultural works.

But what about the interests of the creative contributors with whom we collaborate in making our motion pictures? The legitimate interests of these contributors are protected through collective bargaining contracts and through individual contracts. They are also protected under common law or principles of law as well as other statutory law. Congress reached that conclusion after an exhaustive study conducted during the Berne debate.

Take, for example, the desire to insure that a contributor gets credit for his or her work on the work itself, on the film. The credits you see at the end of a film and sometimes at the beginning of a film and on all newspaper ads and billboards demonstrate that industry agreements and individual agreements work.

How about the contributor's chance to control changes to the work he did on a film? Well, the director is an integral part of making a motion picture. And during the last round of collective bargaining in 1987 between the directors and the producers, the directors gained the right to consult in the adaptation of film to video.

And in a way that is even misleading, because the directors have been consulted on video transfers for many years. I do not know of any major studio that does not call and provide access to a director when there is a transfer from film to video.

This week the producers are in the middle of a new round in the negotiations with the directors. I understand both sides are committed to devising a plan that will further address the legitimate interests of the directors. And we look forward to informing the committee of progress as soon as possible.

For now, I would like to submit the testimony of Nick Counter, president of the Association of Motion Picture and Television Producers and the producers' chief negotiator, that he presented to the Senate during an October hearing. It highlights the creative rights assured the directors through our agreement.

[The prepared statement of Mr. Counter follows:]