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On page 2, you meant rather than 1957, 18 years of inflationary erosion concerning the House copyright revision bill, yoki meant 1967, 8 years?
Mr. CIANCIMINO. No, I did not, Mr. Chairman. It goes as far back as 1957, and I think the first mention of $8 as the fee is contained in 1957.
Mr. KASTENMEIER. 1957?
Mr. KASTENMEIER. Mr. Chapin, you mentioned that today BMI authors and other authors get a performance royalty on French jukeboxes. How is that computed, how is that arrived at, what formula do the French employ, as an example? Do you happen to know?
Mr. CHAPIN. I think it is on a per box fee, and I might add that the rates vary anywhere from $60 to $80 per box, so that we are talking about a much higher rate than is being considered here.
Mr. KASTENMEIER. Mr. Korman, if the present bill were enacted into law, by what percentage would the total revenues of authors and composers represented by the three performance rights societies be more or less increased by virtue of the $8 a box royalty, if any?
Mr. KORMAN. Nr. Chairman, that is hard to say. It appears, if you assume 500,000 jukeboxes in use, which is the number mentioned in September 1974 when the Senate was debating this question
Mr. KASTENMEIER. I am willing to assume the $1 million a year figure mentioned by Mr. Copland.
Mr. KORMAN. Well, at $1 million, the question would be what would be involved in collecting it and how much would it cost to distribute it? That is to say, if this money is to be paid to the Copyright Office, assuming it just funnels through that Office, ASCAP, BMI, and SESAC, for example, under the antitrust provisions in the section, if they can agree quickly among themselves how that should be split that would be one thing. I think ASCAP's gross revenues are approximately $80 million per year. I believe BMI, which in its statement describes itself as the world's largest performing rights society, collects about between $40 and $50 million a year. Mr. Chapin can, I am sure, furnish the figure. As to SESAC, Mr. Ciancimino knows I am sure that it is a couple of million dollars. On the arithmetic, that is $4 million added to that total of approximately $130 million. It is not a very, very large sum of money, Mr. Chairman. But this problem is a problem philosophically and it does create problems for us as we have said on the international scene. Foreign societies try to work special arrangements in their contracts with us because they say you do not collect on jukeboxes and we pay you for those uses. And frankly, Mr. Chairman, I do not know what the cost of distribution to composers and authors would be.
Mr. Mercer's statement says that we do not have current hard data, so that we really cannot propose a reasonable fee. We do not know what it ought to be. But we do think we ought to sit down with these people and find out what it should be.
It is simply incredible to me that a business which generates a half a billion dollars a year, selling nothing but performances of music, and incidentally, they do not pay anything, the record manufacturer pays the record royalty, the mechanical fee for the right to manufacture the records, that is not paid by the jukebox industry. Sure, some of the money flows to the composers because they buy the records.
On the other hand, they also resell a lot of those records, and I do not know how you quite weigh that. They sell their records, they are not all, by any means, worn out when they leave the jukeboxes, and they resell them as used records. But the economics of this data really have not been submitted and we say that we do not know what a fair fee should be. But we would like to find out.
Once they are obligated to pay it is my conviction that a fair agreement will be worked out.
Mr. KASTENMEIER. Let me ask you this, Mr. Korman, if a tribunal were provided for in the statute as the Senate committee provided, and realizing the music operators are businessmen who want to know with as much precision as possible what the liability would be, the tribunal would tend to open end that. They could not rely on the $8 a year or any other figure as of July 1, 1977. What would happen! C'p to that point, it would have been $8, and at that point I assume the performance rights societies would make a proposal to raise the amount to ir number of dollars, maybe $10 or $11, and if that is not agreed to, it would be submitted to the Register of Copyrights, who would submit it to the royalty tribunal under section soi. And what would be the allegations, and how would the determination be made as to what annual rate would thereafter be charged!
Mr. KORmax. Mr. Chairman, I do not think anyone knows precisely what the answers to those questions are. I think this: that under this bill, the act would become effective on January 1, 1977.
Mr. KASTEN METER. January 1.
Mr. KORMAN. On July 1, 1977, under section 802(a) the Register of Copyrights is to cause to be published in the Federal Register notice of commencement of proceedings for the review of the royalty rate specified in section 111 and 115, and we would hope that would be changed to add 116.
Now, the Senate committee report indicates that this is intended to be a review. This is at page 203. This is intended to be a review of the rates specified, of all of the statutory rates specified in the act.
Now, the machinery is not spelled out in very great detail, but I would anticipate, Mr. Chairman, that what would happen is this: We would sit down with the MOA or some committee of jukebox operators authorized to speak by the MOA and what we would do, as in the radio industry, for example, the National Association of Broadcasters, XAB, appoints a committee to negotiate with us. They advise us, through their counsel, that they are authorized to represent such and such stations. With those that are not represented we sign an extension agreement providing that the licenses be extended subject to retroactive adjustment when agreement is reached. As I have said, we have never had to go as far as having a court hearing on the merits.
Here I think we would try to sit down with an MOA committee and try to work something out, because as the chairman points out, it would be quite a risk for the MOA to go into arbitration on the $S fee if they can work out a deal that they can agree is reasonable. And there would be a risk. They would know more about it then than we do be. cause they know what the profits are. For example, they said they operate several businesses. They put it in terms of not being able to survive economically operating only the jukebox part of their business. I do not know whether that is true or not.
But, you get the problems of different businesses getting mixed up in one operation, or trying to separate out what is really the profit from jukebox aspects of the business.
Mr. KASTENMEIER. Let me say that that is an important revelation, because if the criterion is profits of the jukebox industry, that is one thing. If it is, as has been alluded to by some of the other witnesses, cost of living, or erosion over a period of time and the value of a set amount, fixed at a figure, that is quite something else.
Mr. KORMAN. It is not profits in any other area, Mr. Chairman, it is the value of the right. But you see, in all other areas you have a history. The radio industry was paying at one time, the local radio stations were paying ASCAP 214 percent, from 1941 through 1958, and they came in with a committee of the NAB, and they petitioned the court to reduce the rates. And they said we have been hit, and this was in 1959, by the full impact of television, and the recession of the fifties, and they said we ought to get a rate reduction. And anyway, ASCAP is doing very well with their new television incomes. And we sat around the table and we worked out a reduction from 214 to 21 percent, and agreed on ways to resolve some of the accounting problems.
Incidentally, the history in radio has been that the rates have gone down. The ASCAP rate is now 1.725 percent, and it was not too long ago it was 214 percent. And this provision, Mr. Chairman, does not just provide for the rates to be increased. If the jukebox industry can come in and show that they are hurting, and $8 is too much, they can get the rates reduced. We think they put up such a fuss, frankly, because they are concerned that a fairminded arbitration panel would come up with a higher figure. We think they would too, and we think they should if that is what the facts justify.
Now, you say on what basis. Not profitability, but fair return compared to other things. What do ASCAP, BMI, and Sesac charge when they license a restaurant and the owner buys his records, and plays the music for the benefit of his patrons and he has to pay a license fee? And how does that relate to what he will be charged when the public pays for the music?
Mr. KASTENMEIER. Thank you. I'm going to yield.
Mr. Drinan. Just a point of information at this point. Would you tell us the arrangement with Muzak?
Mr. KORMAN. Muzak is a background music service which provides simultaneous performances, either over leased telephone wires or by means of a subchannel of the FM broadcast, to subscribers who pay Muzak a fee. Under one agreement we grant Muzak locally-it is a franchised operation, they have Muzak operators, let us say, in Boston and New York and so forth, and ASCAP has one agreement, and the same is true I believe for BMI and SESAC, they each have one agreement with each Muzak operator which authorizes the Muzak operator to license each subscriber. And in turn, the license fee paid for that license for the subscriber varies. They may be factories, doc. tors' offices, barbershops, restaurants, all kinds of users. The way the ASCAP agreement works, if it is what we call an industrial type of premises, a place that ASCAP representatives would not themselves find—an office or factory, which the public is not admitted to it, the fee is 312 percent of what the subscriber pays to Muzak. If it is a public type of place, such as a restaurant or shop, the last agreement was $27 per year, but a special and lower rate exists for shopping centers where the first unit was $27 and additional units were $15 each. But those rates are now subject to one of these court proceedings where we have not moved for several years. We do not try to make these expensive; in fact, we try to keep them cheap, and they are cheap. We have not moved for several years, and Mr. Patterson can confirm this, he represents the Seeburg people who have a background music service, because of the case that was brought testing the question of whether the old Buck v. Jerrell LaSalle Realty ('o. is still good law, and the Muzak operators say that they suffer competition from the people who install their own radios, and then hook up loudspeakers and play music in that fashion. Muzak says since they (the radio users) do not have to pay and since the cable cases were decided by the Supreme Court; if they do not have to pay and Muzak does, the ASCAP fee for Muzak should be reduced. We do not agree. But prior to asking the judge to decide whether Muzak's argument is relevant, we have agreed to hold off the Muzak and Seeburg proceedings until the Supreme Court decides the case that was argued last April, 20th Century Music ('0. v. Atiken.
Mr. KASTEN MEIER. The gentleman from California, Mr. Danielson.
Mr. DANIELSON. I have just a few questions. As to ASCAP, BMI and SESIC, it is my understanding that these are at least similar organizations. Am I right or wrong on that!
Mr. CIANCIMINO. That is correct, Mr. Danielson.
Mr. KORMAN. That depends on what you mean by similar, but for this purpose, yes.
Mr. DANIELSON. I am not interested in splitting hairs. Some of you are not engaged in packing corned beef, but you are all engaged in licensing the performance of musical composition, is that correct?
Mr. CIANCIMINO. That is correct.
Mr. DANIELSON. Would the $8 per machine, and I know none of you agree with that, but I have got to have something to talk about, with the $ per machine per year fee be payable to each of the three, ASCAP, B!II and SESAC, or is it to some of the:n or is there one fee to all of them, and in the latter event, which I think is probably true, because I see a nodding of a very knowledgeable head in the background, then I would like to know what kind of an arrangement do you have to divide up that fee?
Mr. KORMAN. We have never had the pleasure of having to make such an arrangement because we have never collected the fee.
Mr. DANIELSON. I will stipulate to that now, but now if you can tell me how you would do it I would appreciate it.
Mr. KORMÁN. Well, if I may first, Mr. Danielson, what we would do I think is to have a survey made, on a sample basis, because there are so many performances going on all the time by so many jukeboxes, and we would try to reach an agreement among ourselves as to what share each of the three organizations is entitled to based on what is being used in the jukeboxes.
Mr. DANIELSON. I see. Can a writer of music, a performer for the record, can he belong to more than one of these three organizations? Mr. KORMAN. You say a performer, and you are speaking of a composer or an author of lyrics at this point, not the person who performs unless he also writes the work.
Mr. DANIELSON. We had one excellent presentation from Sy Oliver, and in two and a half pages he got right down to the nuts of it. Let me ask you this: Does Mr. Oliver belong to more than one of three?
Mr. OLIVER. No. I belong to BMI.
Mr. DANIELSON. So your compositions would be handled through BMI and not through the others!
Mr. OLIVER. That is right.
Mr. CIACIMINO. The writer only belongs to one of the three organizations. Each of the three organizations represents their own repertoire of music and a writer cannot belong to more than one, because then it would result in certain crossover rights, and duplication of rights. So generally if a writer is affiliated with BMI, all of the music he composes is represented under this agreement with BMI, through BMI, and the same holds true for ASCAP and SESAC.
Mr. DANIELSON. Now, if BMI had granted a license to some public place where a performance was had, that licensee could utilize the BMI family or repertoire ?
Mr. CIANCIMINO. That is correct.
Mr. DANIELSON. Would that licensee probably also have a license from ASCAP?
Mr. CIANCIMINO. I think maybe I might be able to take a shortcut here, Mr. Danielson. Any user of music on a substantial basis will normally have agreements with the three performing rights organizations. This means whatever music he utilizes, he is pretty confident that this music will be covered under one of the three licenses, so that in the main he is licensed to perform just about any piece of music that is written today.
Mr. Danielson. Now then, in the event that a jukebox operator, be. cause really that is the thrust of the presentation today, jukeboxes, and the event a jukebox operator were brought under the law, it would seem highly probable that he would listen to all three organizations.
Mr. CIANCIMINO. Yes. The way the present bill reads he would pay his $8 into a central area ; namely, the Register of Copyrights or to some other designated agency and that $8 would be for all of the music that he would use on that box for 1 year. And the $8, as Mr. Korman alluded to before, would either be divided on a voluntary basis between the three organizations, or upon failure to reach an agreement there would probably be some kind of determination that would have to be made.
Mr. DANIELSON. But it would not be in the licensee that would determine what the allocation would be?
Mr. CIANCIMINO. That is correct.
Mr. CIANCIMINO. One license with the $8 being distributed among the three performing rights organizations.
Mr. DANIELSON. I see. One question only remaining. I believe in Mr. Copland's statement he said something to the effect that there were